Bar Date and Payment of First Interim Dividend to Unsecured Creditors

As clients may be aware, the bar date for filing Proofs of Debt (PoD) in relation to unsecured claims in the administration of LBIE was previously stated to be 31 December 2012 with the first interim distribution being scheduled for no later than 31 February 2013. The latest progress report sent out by the administrators last month indicated that they intended to bring forward the bar date.

On 2 May 2012, the administrators were granted permission by the High Court to: (a) bring forward the bar date from 31 December 2012 to 31 July 2012; (b) pay a first interim dividend no later than 31 December 2012; and (c) admit, reject or make provision for PoD by 31 October 2012.

Accordingly, it is now the administrators’ intention to pay the first interim dividend to creditors by the end of 2012. Therefore, creditors are strongly encouraged to lodge their PoD’s without delay so that they can participate in the first interim distribution. Only creditors who have submitted a PoD which complies with the UK insolvency rules and have an admitted unsecured claim will be eligible to receive a dividend payment. However, the administrators do intend to pay a ‘catch up dividend’ payment (prior to any further interim distribution) to unsecured creditors whose claims are admitted after the date of the first interim dividend. Any such payment will be at the same dividend rate as the first interim dividend, and will be contingent on there being sufficient funds remaining in the administration.

To be considered eligible to participate in the first interim dividend, and to the extent they have not already done so, creditors must:

• submit a PoD via the LBIE Client Information Portal (CIP) or in hard copy by 31 July 2012;
• have their claim assessed by LBIE;
• execute a Claims Determination Deed (CDD) issued by LBIE and any ancillary documentation, as determined by the administrators; and
• provide their standard settlement instructions (SSI's) for a GBP bank account.

Many creditors will now have received their CDD from the administrators, together with a settlement number which is expressed to be non-negoitable and fixes the value of the creditor's claim against LBIE. If any creditor has submitted a PoD but has not received a CDD, it should contact LBIE at unsecuredcreditors@lbia-eu.com, giving its full name, GAC (if known), contact details and the date on which the PoD was filed. The administrators have stated that creditors who have a proprietary claim (e.g. a client money or trust asset claim) should also submit a PoD by the bar date for their contingent unsecured claim in relation to any shortfall in client money or trust asset distributions.

It should be noted that submission of a valid PoD by the bar date does not guarantee that the claim will be agreed by the administrators prior to payment of the first interim dividend. Furthermore, the rate of the first interim dividend cannot be determined until the administrators are in receipt of all valid PoD’s and have assessed the appropriate level of reserves to be made. For information on the indicative financial outcome of the administration, please refer to our recent client bulletin: Lehman Brothers International (Europe) – Update from the joint administrators’ progress report dated 12 April 2012.

In granting the order sought by the administrators, the High Court directed that any creditor of LBIE has liberty to apply to the Court to vary or discharge the order on seven days’ written notice to the administrators.

For further details regarding the first interim dividend, please refer to the Frequently Asked Questions on the PwC Lehmans website.

Small Claims Settlement Offer

The administrators of LBIE have introduced a Small Claims Settlement Offer which they consider to be in the best interests of LBIE’s general estate by reducing the time and cost incurred in dealing with and settling these types of claim. If creditors sign up to the Small Claims Settlement Offer they will have the benefit of: (a) rapid resolution of their agreed and admitted claim against LBIE; and (b) certainty of their recovery and finality of their relationship with LBIE, reducing the administrative burden on LBIE in dealing with such creditor claims throughout the duration of the administration.

The offer is for a full and final settlement to all creditors (Eligible Creditor(s)) whose claims do not exceed £150,000 via a single payment of 90% of their agreed claim amount. Any creditor whose agreed claim amount exceeds £150,000 may also participate, but the maximum payment will be 90% of £150,000 (i.e. a payment of £135,000).

The payment of the Small Claims Settlement Offer is timed to coincide with the first interim dividend. Creditors who opt for the Small Claims Settlement Offer will not receive a first interim dividend (or any subsequent dividends) but instead will receive a single payment in full and final settlement of their claims.

The Small Claims Settlement Offer is available to all creditors, including those with contingent client money claims (although such clients would have to waive any client money claim that they may have) and / or client asset claims, as well as LBIE’s affiliates. To be eligible to participate in the Small Claims Offer, and to the extent that they have not already done so, Eligible Creditors will be required to:

• submit a PoD via the LBIE CIP or in hard copy by 31 July 2012;
• have their claim assessed by LBIE;
• execute a CDD or (similar agreement) issued by LBIE and any ancillary documentation, as determined by the administrators;
• execute a further agreement with LBIE, accepting the Small Claims Settlement Offer as full and final settlement of all claims under the relevant agreement and where relevant, an agreement assigning any Client Money claim; and
• provide their SSIs for a GBP bank account.

The above requirements must be completed no later than 31 October 2012 in order for a creditor to be considered eligible for the Small Claims Settlement Offer.

If an Eligible Creditor does not wish to accept the Small Claims Settlement Offer then, provided that its claim is admitted by the administrators, it will automatically be entitled to participate in the first interim dividend and any subsequent dividends made throughout the duration of the administration.

Eligible Creditors can apply to participate in the Small Claims Settlement Offer by logging onto the LBIE CIP and clicking the button under the relevant heading to register their interest. The final decision of acceptance is at the sole discretion of the administrators.

The administrators have stated that creditors will not be able to assign or spilt their claims in order to increase their eligibility for the Small Claims Settlement Offer.

The administrators note that the payment percentage in respect of the Small Claims Settlement Offer is not intended to reflect their view of the final aggregate dividend for creditors who choose not to participate in the Small Claims Settlement Offer; the aggregate dividends paid to unsecured creditors could be higher or lower than the 90% being offered under the Small Claims Settlement Offer. The administrators have made it clear that the first interim dividend will be materially lower than 90% although no figure is currently given for this for the reasons given above. For information on the indicative financial outcome of the administration, please refer to our recent client bulletin: Lehman Brothers International (Europe) – Update from the joint administrators’ progress report dated 12 April 2012. All payments relating to the first interim dividend and pursuant to the Small Claims Settlement Offer will be made in GBP.

The administrators are advising all creditors to obtain independent advice as to whether to participate in the Small Claims Settlement Offer.

For further details regarding the Small Claims Settlement Offer, please refer to the Frequently Asked Questions on the PwC Lehmans website.

If creditors have further questions regarding the Small Claims Settlement Offer, please email: smallclaimsoffer@lbia-eu.com. For all other queries relating to the administrators’ recent announcement and which are not dealt with in the Frequently Asked Questions, please contact your existing LBIE contact or the Communications and Counterparty Management team at unsecuredcreditors@lbia-eu.com.

Click here to access the full update on the PwC Lehmans website.