LONDON (Bloomberg) - Lehman Brothers Holdings Inc.'s UK administrators are seeking a London judge's permission to pay as much as $3.3 billion to prime brokerage clients, funds the investment bank took in after its collapse.

PricewaterhouseCoopers LLP (PwC) asked the High Court in London at hearings scheduled to conclude yesterday to determine how it should distribute securities, redemption proceeds, dividends and interest payments that have accumulated since Lehman's September 2008 bankruptcy. The administrators have legal duties to the prime brokerage clients, most of which are hedge funds, PwC's lawyer, William Trower, said in a court filing.

Lehman Brothers International Europe, which ran Lehman's prime brokerage in London, had about 700 hedge funds and other asset managers as clients. Lehman's bankruptcy froze at least $65 billion in customer assets held by the company's New York brokerage unit, Lehman Brothers Inc., PwC has estimated.

"LBIE has obligations to those of its prime brokerage clients for whom LBIE holds securities," Mr. Trower said in the filing. "LBIE is unable to deliver securities without exposing itself and the administrators to potential claims from competing claimants."

PwC in July asked the court whether money received by Lehman's European prime brokerage unit should be held in a trust, paid to the clients as an administration expense or treated as a so-called general unsecured claim.

PwC is siding with a prime brokerage client, RAB Market Cycles (Master) Fund Ltd., and taking the stance that the money should be paid as an administration expense, according to a court document outlining PwC's legal arguments.

The administrators are asking the court for direction because "the sums at stake are substantial", and "it would be contrary to the interests of LBIE's estate" to distribute "post-administration cash", Mr. Trower said in the filing.

Hong Leong Bank Bhd., a so-called general estate creditor that was asked by PwC to respond, disagreed and says the funds should go into LBIE's general estate. Kuala Lumpur-based HLBB said it's a "surprise" that the administrators are taking a stance on an issue, where they had previously only been asking for direction.

"HLBB has rather been pitched into fighting against both the administrators and RAB on the point," the bank's lawyer, Nicholas Peacock, said in a court filing. "The funds should no longer be regarded as belonging to a client."