Lehman Brothers International (Europe) (“LBIE”) Update - First Interim Dividend and LBI Pending Trades CDDs
10 Sep 2012
The Administrators of LBIE have provided two recent updates. One gives further information concerning the first interim distribution and the other relates to “LBI Pending Trades CDDs”.
First Interim Distribution
The bar date for the submission of proofs of debt was 31 July 2012. As at that date, the Administrators had received £17.9 billion of non-Affiliate claims and £48.3 billion of Affiliate claims. This is significantly higher than the top end of the Administrators’ range of estimates given in April 2012 of £16.3 billion of non-Affiliate claims and £28.8 billion of Affiliate claims.
Although the bar date has now passed, the Administrators still recommend that any unsecured creditor who has not submitted a proof of debt via the creditors’ portal should do so as soon as possible.
As advised in our previous updates, creditors must have their claims agreed and admitted via a Claims Determination Deed (“CDD”) by 31 October 2012 in order to be eligible for the first dividend.
The Administrators expect to pay the first distribution in late November or early December 2012. The rate of the first dividend will be decided in late October and all claimants with an executed CDD will then be notified in November of the dividend rate, the total amount of the dividend being distributed and the level of reserves for unsettled claims.
Creditors who are wishing to trade their claims should be aware that although no formal cut-off date for trading prior to the distribution date has been announced, the Administrators are likely to refuse to execute the necessary Transfer Notices at some point (perhaps a few weeks) before the distribution date, since preparations will need to be made to pay the dividend to the existing creditors.
The full LBIE update can be viewed here.
LBI Pending Trades CDDs
The Administrators have proposed a form of CDD to agree the unsecured claims of trust asset creditors who had trades pending at LBI.
Because LBI went into liquidation in the US on 19 September 2008, four days after LBIE went into administration, LBI continued to process many trades in the intervening period (the “LBI Pending Trades”). It has not proved possible for LBIE and LBI yet to agree and confirm whether many of those trades settled or failed. In such cases, this has prevented LBIE from agreeing the quantum of affected trust asset creditors’ unsecured claims because the settlement status of the LBI Pending Trades may change the nature and/or quantum of the claims.
For example, where a creditor had $1,000 in its margin account on 15 September 2008 and an LBI Pending Trade consisting of the purchase of 30 shares in a company at a price of $6 per share (total cost $180):
- If the trade settled, the creditor would have an asset claim to the purchased shares and an unsecured claim for the remaining cash margin balance after deduction of the purchase price (i.e. $1,000 - $180 = $820); or
- If the trade failed, the creditor would have no asset claim but the unsecured claim to the cash margin balance would remain at $1,000.
The Administrators are now proposing LBI Pending Trades CDDs in order to agree at least part of such creditors’ claims before the present uncertainty is resolved by LBI and LBIE, either consensually or through litigation. The CDDs will allow such creditors to participate in any interim dividend payments and to transfer the agreed part of their claims to third parties.
The LBI Pending Trades CDDs will only agree a creditor’s unsecured claim and not its trust asset claim. An assumption will be made as to whether the relevant trades settled or failed on the basis of which outcome produces the minimum possible unsecured claim. So, using the example above, the CDD would assume that the trade had settled, since that would produce an unsecured claim of $820 rather than a claim of £1,000 if the trade had failed. If the assumptions prove subsequently to be incorrect, the unsecured claim may be adjusted upwards.
The full LBIE update can be viewed here and includes a link to FAQs.
If you would like further information please feel free to contact Robin Henry.