NEW YORK (REUTERS).- Bankrupt financial group Lehman Brothers Holdings Inc is selling off part of its art collection, including works by Gerhard Richter and Maya Lin, in the hopes of returning millions to creditors.

Despite a lukewarm modern art market, Sotheby's estimates the auction of 160 works in New York on Saturday will yield $10 million. Proceeds of the sale will be used to pay creditors owed hundreds of billions following its 2008 bankruptcy, the largest ever in the United States.

Because of the sluggish market for modern art Lehman is selling a smaller number of pieces than initially planned and is focusing on big-name artists.

"You are seeing very selective buying," said Gabriela Palmieri, a senior specialist at Sotheby's contemporary art department.

In a bankruptcy auction buyers know that sellers are eager to get deals done, giving buyers an edge. So a smaller lot will whet art buyers' appetite and make bidding more competitive.

"No one wants to see a large glut," Palmieri said.

Many of the pieces up for auction were acquired by asset manager Neuberger Berman, which Lehman bought in 2003. Neuberger re-emerged in 2009 as an independent asset manager.

Palmieri said a number of buyers had already expressed an interest in bidding, including foreign collectors and even some ex-Neuberger executives.

Sotheby's focused on top artists, particularly those whose art has proved more resilient to the drop in prices on the art market since the downturn that began in 2007.

The most expensive item up for sale is a Damien Hirst's We've Got Style (The Vessel Collection - Blue/Green), a series of three cabinets holding ceramic objects that Sotheby's estimates could fetch between $800,000 and $1.2 million.

A painting by Julie Mehretu, who was commissioned by Goldman Sachs to make a mural painting for the bank's new Lower Manhattan headquarters, has an estimated price range of $600,000 to $800,000.

Other major artists whose work will be auctioned include Andy Warhol, John Baldessari, Richard Prince and Robert Rauschenberg.

"The collection casts a wide net in terms of art history," Palmieri said.

The proceeds of the auction will only be a fraction of what the investment bank's liquidators are trying to recover.

At the time Lehman filed for bankruptcy, it listed $639 billion in assets. In April, Lehman submitted a first draft of its plan to end its reorganization and pay creditors, estimating that its recoverable assets amounted to $50 billion.

Under the plan, unsecured creditors would receive about 15 percent to 27 percent of their claims while some secured creditors would be paid in full.

Despite some concern about the state of the art market, Palmieri expects bidders to take advantage of the opportunity to snap up these works.

"Clients still want to feel that they're getting an opportunity but looking at certain works, know how good they are, how rare they are," she said.

(Reporting by Phil Wahba; Editing by Patricia Reaney)