How does the Joint Administrators' of Lehman Brothers Holdings Plc (“PLC”) and LBIE feel about the CTs' and ECAPS' Guarantees?
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"Lehman Brothers Holdings plc (in administration)
Ongoing litigation
Ongoing litigation
Announcement of an application to Court to seek directions on certain legal issues which are relevant to the priority and payment of future distributions to holders of subordinated debts – 29 March 2023
On 14 March 2023, the Joint Administrators of Lehman Brothers Holdings Plc (“PLC”) issued an application to Court for directions (the "Application"), pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986, on certain legal issues which are relevant to the priority and payment of future distributions to holders of its subordinated debts (the "Priority Legal Issues").
The Court has indicated that the procedural hearing is listed to take place during the first week of May 2023, date to be confirmed.
There are three respondents to the Application:
LB GP No.1 Limited (In Liquidation) ("LB GP No1");
Lehman Brothers Holdings Inc ("LBHI"); and
Deutsche Bank A.G. (London Branch) ("Deutsche").
Any distributions to PLC's subordinated creditors will be paid in accordance with the priority ruling of the Court of Appeal in its judgment of October 2021, which determined that the subordinated claim against PLC on the PLC Sub-Notes ("Claim D" as defined in paragraph 18 of Mr Justice Marcus Smith's judgment of 3 July 2020) takes priority over the subordinated claim against PLC on the PLC Sub-Debt ("Claim C" as defined in paragraph 15 of Mr Justice Marcus Smith's judgment). The Priority Legal Issues on which directions are now sought concern further aspects of subordinated creditor entitlements, and how distributions to them ought properly to be approached.
Priority Legal Issues as regards statutory interest
The first three Priority Legal Issues arise in relation to the correct approach to any payment of statutory interest on the PLC Sub-Notes (Claim D), and are as follows:
(1) Whether the principal amount of the PLC Sub-Debt (Claim C) falls to be paid in priority to statutory interest payable on the claim in respect of the PLC Sub-Notes (Claim D), or whether statutory interest payable on the PLC Sub-Notes falls to be paid in priority to the principal amount of the PLC Sub-Debt.
(2) Whether statutory interest payable on the claim in respect of the PLC Sub-Notes falls to be calculated by reference to the face amount of the PLC Sub-Notes, or by reference to the discounted sum payable on that claim in accordance with Rule 14.44 of the Insolvency (England and Wales) Rules 2016.
(3) Whether the applicable period for the purposes of the calculation of statutory interest on the claim in respect of the PLC Sub-Notes begins with the date on which PLC entered administration, or on the date on which, in accordance with the subordination provisions of the PLC Sub-Notes, the holder of the PLC Sub-Notes became entitled to submit proofs of debt in PLC's administration in respect of that claim (and, if so, what that date is).
Priority Legal Issues as regards the ECAPS Guarantees
Clause 2.11 of each Deed of Guarantee in favour of "Holders" (as defined in each Deed of Guarantee) (each one, an "ECAPS Holder") of certain preferred securities issued by each of Lehman Brothers UK Capital Funding LP, Lehman Brothers UK Capital Funding II LP and Lehman Brothers UK Capital Funding Ill LP (the "ECAPS Guarantees") provides:
“In the event of the winding-up of the Guarantor [i.e. PLC] if any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of amounts owing under this Subordinated Guarantee, shall be received by any Holders, before the claims of Senior Creditors have been paid in full, such payment or distribution shall be held in trust by the Holder, as applicable, and shall be immediately returned by it to the liquidator of the Guarantor and in that event the receipt by the liquidator shall be a good discharge to the relevant Holder. Thereupon, such payment or distribution will be deemed not to have been made or received."
By order dated 24 July 2020 in the previous Court directions application, Mr Justice Marcus Smith declared by consent that any liability of PLC under the ECAPS Guarantees (referred to as "Claim E") ranked for distribution after Claim D and Claim C.
The further Priority Legal Issues are as follows:
(4) Whether clause 2.11 of the ECAPS Guarantees imposes upon the Holder (as defined therein) a trust in respect of any proceeds which have been distributed by PLC, which takes effect on receipt of those proceeds and requires such proceeds to be turned over to PLC. If so, what are the circumstances in which such trust arises and in respect of what proceeds.
(5) If PLC makes distributions on the PLC Sub-Notes but proceeds are thereafter turned over to PLC by the Holder pursuant to clause 2.11 of the ECAPS Guarantees, what is the resultant order of priority, as between the PLC Sub-Debt (Claim C) and the PLC Sub-Notes (Claim D), in respect of such sums received by PLC?
The application notice and accompanying witness statement in support of the Application (the sixth witness statement of Edward John Macnamara) are available through the following links on this page. The witness statement provides further information as to the factual background to, and issues addressed by, the Application.
The Application Notice dated 14 March 2023
Sixth Witness statement of Edward John Macnamara dated 14 March 2023
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on substantive matters relating to the Application.@@@@@@@@@@ STOP HERE @@@@@@@@@@
Update dated 10 August 2022 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Supreme Court Order
As reported in the LBH Administrators’ previous update, in November 2021 SLP3 and LBHI filed an application to the UK Supreme Court seeking permission to appeal certain aspects of the Court of Appeal’s ruling.
On 8 August 2022, following the Supreme Court’s consideration of the SLP3 and LBHI application on the papers, the parties to the Priority Applications were informed that the Supreme Court has refused SLP3 and LBHI permission to appeal. The Supreme Court also ordered that SLP3 and LBHI pay the costs of the unsuccessful permission application incurred by the LBH Administrators, Deutsche Bank and LB GP No1. A copy of the Order dated 8 August 2022 made by the Supreme Court can be found here.
Update dated 15 December 2021 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Permission to Appeal Steps
Further to our update dated 29 October 2021 following the recent Court of Appeal judgment in the Priority Applications, SLP3 and LBHI have filed an application to the UK Supreme Court seeking permission to appeal certain aspects of the Court of Appeal’s ruling.
The application was filed by SLP3 and LBHI on 17 November 2021. The Supreme Court rules permit respondent parties to file notices of objection, which can include brief reasons as to why a respondent party says that permission to appeal should not be given. LBH (in respect of permission on the LBHI2 Appeal), Deutsche Bank (in respect of permission on the LBHI2 Appeal and the PLC Appeal) and LB GP No1 (in respect of permission on the PLC Appeal) have filed such notices of objection. Copies of these documents can be found below:
SLP3 and LBHI’s Application for Permission to Appeal
LBH’s Notice of Objections
Deutsche Bank’s Notice of Objections
LB GP No1’s Notice of Objections
We expect the Supreme Court to determine the applications for permission to appeal on the papers.
Update dated 29 October 2021 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Court of Appeal Order
The LBH Administrators’ previous update dated 20 October 2021 briefly summarised the outcome of the recent appeal hearing which took place before the Court of Appeal from 4-8 October 2021. As foreshadowed in that update, a copy of the sealed Order dated 21 October 2021 made by the Court of Appeal can be found here.
Any party wishing to understand the Court of Appeal’s Order should read the Order in full. However, in case it is of assistance and without prejudice to the full terms of the Order, certain points emerging from the Order are as follows:
The LBHI2 Appeal - which sought to appeal paragraph 1 of the first instance Order concerning LBH’s priority over SLP3 in the LBHI2 estate - has been dismissed;
The PLC Appeals - which sought to appeal paragraphs 6 and 7 of the first instance Order concerning priority ranking in the LBH estate, and concerning whether LBHI’s claim in the LBH estate fell to be reduced by virtue of certain other payments - have been allowed, and those paragraphs of the first instance Order have been replaced with new paragraphs reflecting the Court of Appeal’s decision;
SLP3 and LBHI’s requests for permission to bring a further appeal to the UK Supreme Court have been refused; and
The Court of Appeal has made various directions as to liability for costs.
It should also be noted that although permission to appeal was refused by the Court of Appeal, the unsuccessful parties on the appeal have a further window in which to apply directly to the UK Supreme Court for permission to appeal.
Update dated 20 October 2021 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Appeal Judgment
As reported in recent updates, the appeal hearing in respect of the Priority Applications recently took place in the Court of Appeal.
On 20 October 2021, the Court of Appeal delivered its judgment on those appeals. A copy of that judgment is available here.
Any party wishing to understand the Court of Appeal’s ruling should read the judgment in full. However, in case it is of assistance and without prejudice to the full terms of the judgment, certain points emerging from the ruling are as follows:
In respect of the LBHI2 Application concerning the manner in which funds are or may be distributed from the LBHI2 estate, the Court of Appeal dismissed SLP3’s appeal against aspects of Mr Justice Marcus Smith’s ruling at first instance. The Court of Appeal has therefore upheld the first instance ruling that the sub-debt claim held by PLC (that is, Lehman Brothers Holdings PLC) has priority to the sub-notes claim held by SLP3, and that the sub-notes held by SLP3 do not fall to be rectified in any way.
In respect of the PLC Application (sometimes referred to as the LBH Application) concerning the manner in which funds are or may be distributed from the PLC estate, the Court of Appeal has allowed the appeals of LB GP No1 and Deutsche Bank. The Court of Appeal had held that:
the sub-notes claim against PLC held by LB GP No1 as general partner of certain limited partnerships has priority to the sub-debt claim held by LBHI (whereas at first instance, these claims had been held to rank pari passu); and
the quantum of LBHI’s sub-debt claim against PLC falls to be reduced by virtue of of certain previous guarantee payments made in respect of that claim (whereas at first instance it had been held that there should be no such reduction).
The Administrators continue to consider the judgment, but welcome the Court of Appeal’s confirmation that PLC’s subordinated claim in the LBHI2 estate ranks ahead of the subordinated claim of SLP3.
It is anticipated that the Court of Appeal will issue a sealed Order in respect of its ruling in due course.
This high-level summary has been prepared in the hope that it is of assistance to creditors. It is not, and is not intended to be, a detailed summary of the arguments which were deployed or the approach taken by the Court of Appeal at the recent hearing, and does not constitute any form of advice.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – daily transcripts
As reported in our previous update, the appeal hearing in the Priority Applications commenced on Monday 4 October 2021. In keeping with the parties’ approach at the High Court hearing, the parties have engaged a transcriber to produce daily transcripts of the appeal hearing. In this respect, the following can be found below.
Daily Transcript – 4 October 2021
Daily Transcript – 5 October 2021
Daily Transcript – 6 October 2021
Daily Transcript – 7 October 2021
Daily Transcript – 8 October 2021
Please note that:
The transcript is published in the form received from the transcriber (i.e. prior to review by any party to the Priority Applications and without corrections);
If an amended version of the transcript is subsequently agreed between the parties that will be posted on the website in due course; and
The LBH administrators are posting such transcript solely for the convenience of interested third parties and neither they nor any other party makes any representation as to the accuracy of such transcript nor accepts any responsibility for any inaccuracies contained within it.
Update dated 4 October 2021 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Appeal Update
As reported in our previous update on 24 February 2021, the appeal hearing in the Priority Applications commenced today, Monday 4 October 2021. The hearing is anticipated to last 5 days, expecting to finish on Friday, 8 October 2021. It is anticipated that the Court of Appeal will deliver judgment at a later date.
Subject to any directions which the Court may make, we anticipate that the timetable for the hearing will be as follows:
Days 1 - 3: LBHI2 Application appeal; and
Days 3 - 5: PLC Application appeal.
We understand that the Court intends to make a live-streamed broadcast of the appeal hearing accessible from the judiciary’s website. We understand that a recording may also be accessible from this website after the hearing.
As part of this update, we set out below links to the following skeleton arguments filed in respect of the appeal hearing which were not made available in our last update of 24 February 2021:
Lehman Brothers Holdings Scottish LP 3 skeleton argument dated 18 January 2021 in the LBHI2 Application appeal is available here.
PLC skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
Deutsche Bank A.G. skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
LBHI2 skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
Lehman Brothers Holdings Inc. skeleton argument dated 1 March 2021 in the PLC Application appeal is available here.
PLC skeleton argument dated 1 March 2021 in the PLC Application appeal is available here.
The LBH Administrators will continue to publish updates on the progress of the litigation as appropriate.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on relevant matters relating to the Priority Applications.
Update dated 24 February 2021 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Appeal Update
As reported in previous updates, an appeal process is underway in the Priority Applications. The Court of Appeal has listed the appeal hearing to take place beginning on Monday 4 October 2021, with a time estimate of 5 days.
The parties will be taking procedural steps to prepare for that hearing in accordance with a timetable approved by the Court, including the exchange of skeletons arguments. Certain skeleton arguments have been served to date, with others to follow in accordance with the procedural timetable.
As part of this update, we set out below links to the following skeleton arguments:
The Deutsche Bank A.G. (London Branch) skeleton argument dated 18 January 2021 in the PLC Application appeal is available here.
The LB GP No1 Limited skeleton argument dated 18 January 2021 in the PLC Application appeal is available here.
It is important to note that the above skeleton arguments are not all of those which have been served so far on the appeals, nor are they all that will be served as part of this process. Not all parties to the appeal process have consented to their skeleton arguments being posted to this website in advance of the appeal hearing itself. As such, the two skeleton arguments referenced above do not reflect the full extent of the argument between the relevant parties to the appeals.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on relevant matters relating to the Priority Applications.
Update dated 16 December 2020 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Appeal Update
By Orders dated 14 December 2020, the Court of Appeal has determined the permission to appeal applications which were referred to in our previous update on the Priority Applications.
Within the LBHI2 Application, the Court of Appeal has granted SLP3 permission to appeal the Judge’s conclusion that there was no basis for rectification of the terms of the LBHI2 Sub-Notes. A copy of the Court of Appeal’s Order is available here.
Within the LBH Application, the Court of Appeal had granted Deutsche Bank permission to appeal the Judge’s conclusion that LBHI’s claim on the PLC Sub-Debt has not been reduced, discharged or diminished by virtue of the interaction of LBHI's claims under the PLC Sub Debt Agreements with certain other instruments. However, the Court of Appeal has refused Deutsche Bank permission to appeal the Judge’s conclusions that (a) LBHI’s claim on the PLC Sub-Debt was not released by an earlier Settlement Agreement and (b) LB GP No1’s claims on the PLC Sub-Notes fall to be discounted under Rule 14.44 of the Insolvency (England and Wales) Rules 2016. A copy of the Court of Appeal’s Order is available here.
No date has yet been set for the appeal hearing.
Update dated 24 November 2020 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Appeal Update
We refer to the previous updates in respect of the Applications. As foreshadowed in our update dated 13 October 2020, on 26 October 2020:
SLP3 filed an Appellant’s Notice with accompanying documents in respect of the High Court’s finding that the LBHI2 Sub-Debt ranks ahead of the LBHI2 Sub-Notes, but only on grounds of construction for which permission to appeal had been granted (“SLP3 Appeal”);
Deutsche Bank and GP No 1 filed Appellants’ Notices with accompanying documents in respect of the High Court’s finding that the PLC Sub-Debt ranks pari passu with the PLC Sub-Notes, but only on grounds of construction for which permission to appeal had been granted (“DB and GP No 1 Appeal”); and
SLP3 and Deutsche Bank filed separate applications seeking permission from the Court of Appeal to appeal additional findings within the judgment which the High Court initially refused at the Consequentials Hearing (the “Permission Applications”).
On 23 November 2020, the LBH Administrators filed a Respondent’s Notice in respect of the SLP3 Appeal and LBHI filed a Respondent’s Notice in respect of the DB and GP No 1 Appeal.
Both Deutsche Bank and the LBH Administrators have filed a short response opposing SLP3’s Permission Application. LBHI has filed a short response opposing Deutsche Bank’s Permission Application. The substantive appeal proceedings, being the SLP3 Appeal and the DB and GP No 1 Appeal, are stayed until the determination of the Permission Applications.
We expect the Court of Appeal to determine the Permission Applications on the papers. No hearing date has yet been set for the appeals.
Update dated 13th October 2020 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Consequential Matters
We refer to the previous updates in respect of the Applications, in particular to our update dated 30 July 2020. That update related to the Court's decision on certain consequential matters following the delivery of judgment on 3 July 2020. The Court has now approved formal Orders in the LBHI2 Application and in the LBH Application which reflect the rulings made in the judgment and in the Consequentials Hearing which took place on 24 July 2020. Copies of those Orders are available here and here.
As part of those Orders and as previously reported, the Court has granted permission to appeal in respect of certain aspects of the judgment. As part of the appeal steps, by an earlier Order the Court has also extended time for Appellant's Notices (one of the appeal steps) until 21 days after the date of sealing of the Orders made following the Consequentials Hearing (ie the Orders to which links are provided above).
We anticipate providing further updates as regards the likely appeal timetable when that process has progressed further.
This high-level summary has been prepared in the hope that it is of assistance to creditors. Creditors should, however, refer to the full terms of the judgment, and the Orders which are linked to this update.
Update dated 30 July 2020 on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Consequentials Hearing
As foreshadowed in our previous announcement, on Friday 24 July 2020 there was a further hearing (conducted remotely) before Mr Justice Marcus Smith to address certain consequential issues arising from the Judgment delivered on 3 July 2020. At the hearing, the Court heard submissions from the parties on (i) costs and (ii) permission to appeal. The Court's rulings on these matters, together with its rulings arising from the Judgment, will be the subject of an Order of the Court which is in the process of being prepared for the Judge's consideration.
In high level summary only, and without prejudice to the Judgment and the terms of the Judge's Order which, when approved, will govern the position:
the Judge granted SLP3 permission to appeal the finding that the LBHI2 Sub-Debt ranks ahead of the LBHI2 Sub-Notes, but only on grounds of construction and not on grounds of rectification;
the Judge granted Deutsche Bank and GP No1 permission to appeal the finding that the PLC Sub-Debt ranks pari passu with the PLC Sub-Notes, but only on grounds of construction;
the Judge refused all other applications for permission to appeal;
subject to certain points, the Judge ordered SLP3 to pay the PLC Administrators' costs of the LBHI2 Application;
the Judge ordered Deutsche Bank to pay the majority of LBHI's costs of the PLC Application; and
the Judge confirmed that the LBHI2 Administrators' and the PLC Administrators' costs are expenses of the respective administrations.
A further update will be published following the Judge's approval of the Order in respect of these matters.
This high-level summary has been prepared in the hope that it is of assistance to creditors. It is not, and is not intended to be, a detailed summary of the arguments which were deployed or the approach taken by the Judge at the recent hearing, and does not constitute any form of advice.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Court Judgment
Following a 2 week hearing before Mr Justice Marcus Smith in November 2019 a Judgment running to over 150 pages was handed down on 3 July 2020. Attached is the Judgment, together with a short summary prepared by Hogan Lovells who act for the LBH administrators in the proceedings. There will be a further hearing on 24 July 2020 to address consequential issues arising from the Judgment.
Summary of Lehman Brothers Court Judgment regarding priority of holders of subordinated claims
Court judgment
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – daily transcripts
The parties have engaged a transcriber to produce daily transcripts of the LBH and LBHI2 Applications. The transcripts produced so far can be found below. Moving forward, the LBH administrators intend to post each daily transcript on the LBH website the following business day.
Daily Transcript - 11 November 2019
Daily Transcript - 12 November 2019
Daily Transcript - 13 November 2019
Daily Transcript - 14 November 2019
Daily Transcript - 15 November 2019
Daily Transcript - 19 November 2019
Daily Transcript - 20 November 2019
Daily Transcript - 21 November 2019
Daily Transcript - 22 November 2019
Please note that:
The transcript is published in the form received from the transcriber (i.e. prior to review by any party to the Applications and without corrections);
The parties reserve the right to post amended versions of the transcript should they consider it necessary, but accept no responsibility for doing so; and
The LBH administrators are posting such transcript solely for the convenience of interested third parties and neither they nor any other party to the Applications makes any representation as to the accuracy of such transcript nor accepts any responsibility for any inaccuracies contained within it.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – 11 November 2019
We refer to various previous updates which the LBH Administrators have published in respect of the LBH Application and the LBHI2 Application.
As noted in our update of 15 October 2019, the combined trial of the LBH Application and the LBHI2 Application commenced today, 11 November 2019. In the lead-up to the trial's commencement, the parties to the Applications exchanged their Skeleton Arguments, copies of which appear below:
LBH Skeleton Argument;
LBHI2 Skeleton Argument;
LB GP No 1 Limited Skeleton Argument;
Deutsche Bank A.G. (London Branch) Skeleton Argument;
LBHI and SLP3 combined Skeleton Argument;
Appendix A to the LBHI and SLP3 combined Skeleton Argument; and
Appendix B to the LBHI and SLP3 combined Skeleton Argument.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on relevant matters relating to the LBH Application.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – 15 October 2019.
We refer to various previous updates which the LBH Administrators have published in respect of the LBH Application and the LBHI2 Application.
In our update of 2 August 2019, we noted that a pre-trial review hearing was anticipated to be held during the week of 14 October 2019. In the lead up to that scheduled hearing, the parties to the Applications reached substantive agreement as to the matters that would have been considered at the pre-trial review hearing, such that they agreed that the hearing was no longer required. The pre-trial review hearing was therefore cancelled.
The combined trial of the LBH Application and the LBHI2 Application will commence in the week of 11 November 2019, with pre-trial reading days scheduled to be held on 7 and 8 November. The trial, including the pre-trial reading, is expected to last up to 12 days. We currently expect the timetable to be broadly as follows:
Day 1 - 2: Pre trial reading - 7 and 8 November
Day 3 - 4: Openings by LBHI2, LBH, LBHI/SLP3, Deutsche Bank A.G. (London Branch)
Day 4 - 7: Key witnesses
Day 8: Break
Day 9 - 12: Closings
The LBH Administrators will continue to publish updates on the progress of the litigation as appropriate.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – 2 August 2019
We refer to various previous updates which the LBH Administrators have published in respect of the LBH Application and the LBHI2 Application.
In our update of 6 August 2018, we noted that a further procedural hearing was scheduled to take place on 20, 21 or 22 May 2019. In the lead up to that hearing, the parties to the Applications reached substantive agreement as to the further procedural directions which they considered would be appropriate, such that they did not consider that a hearing was required. Instead, Mr Justice Hildyard was invited to consider the proposed further directions on paper. Having done so, Mr Justice Hildyard has made an Order in respect of various further procedural matters.
Since our previous update, the parties to the Applications have been taking various steps required to prepare the Applications for trial, including the exchange of witness statements and, in respect of certain parties to the LBH Application, expert's reports. The LBH Administrators will not be publishing copies of such documents at this time as not all parties agree to such publication.
Consistent with previous updates, it remains anticipated that there will be a pre-trial review hearing in the week of 14 October 2019, and that the combined trial of the LBH Application and the LBHI2 Application will commence in the week of 11 November 2019.
The LBH Administrators will continue to publish updates on the progress of the litigation as appropriate.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts - 29 March 2019
As referenced in the LBH Administrators' previous update on 22 February 2019, LBHI and SLP3 served a joint reply position paper in the LBHI2 and LBH Applications on 22 March 2019, a copy of which is now available here.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on relevant matters relating to the LBH Application.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – 22 February 2019
The LBH Administrators' previous updates on this topic have set out the key procedural steps in the LBHI2 and LBH Applications through to the trial (which is listed to commence during the week of 11 November 2019).
In accordance with Mr Justice Mann's Order dated 24 July 2018, the parties have now exchanged position papers summarising their respective positions on the applications in which they are participating. LBHI and SLP3 served a joint position paper on 11 January 2019 relating to both the LBHI2 Application and the LBH Application, and a copy now appears here. On 22 February 2019, the following parties also served their position papers:
LBH served its position paper in the LBHI2 Application, and a copy now appears here;
LBHI2 served its position paper in the LBHI2 Application, and a copy now appears here;
LB GP No 1 Limited (In Liquidation) served its position paper in the LBHApplication, and a copy now appears here; and
Deutsche Bank A.G. (London Branch) served its position paper in the LBHI2 andLBH Applications, and a copy now appears here.
LBHI and SLP3 have permission to file a reply position paper in the LBHI2 and LBHApplications by 22 March 2019.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on relevant matters relating to the LBH Application.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – 6 August 2018
The LBH Administrators' previous update on this topic summarised the outcome of the recent procedural hearing in this application, which took place before Mr Justice Mann on 23 and 24 July 2018. As foreshadowed in that update, a copy of the sealed Order made by Mr Justice Mann at that hearing now appears here. Amongst other things, the Order sets out the procedural steps which the parties are to take over the coming months, and the dates by which those various steps are to be achieved.
In addition, Mr Justice Mann's approved judgment, delivered at the hearing on 24 July 2018, is now available and a copy appears here.
The Order also provided for the parties to take steps to list certain future Court hearings in respect of the application. These steps have now been taken in conjunction with the Court's listing office, such that the following future hearings have now been listed:
A second procedural hearing is listed to take place on 20, 21 or 22 May 2019;
A "Pre-Trial Review" hearing is listed to take place during the week of 14 October 2019; and
The Trial (encompassing both the LBH Application and the LBHI2 Application) is listed to take place over 6-8 days (plus 2 days of judicial pre-reading), beginning at some point during the week of 11 November 2019.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on all substantive matters relating to the LBH Application.
Update on application to Court to seek a determination on issues of priority in respect of potential distributions to holders of subordinated debts – Hearing on 23/24 July 2018
As reported in our announcement of 3 April 2018, on 16 March 2018 the Joint Administrators of LBH made an application to Court (the "LBH Application") to seek the Court's determination on issues of priority in respect of potential distributions to holders of LBH's subordinated debts. Concurrent with the LBH Application, the Joint Administrators of LB Holdings Intermediate 2 Limited ("LBHI2") issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBHI2's subordinated debts (namely, LBH and Lehman Brothers Holdings Scottish LP 3) should receive any distributions from the LBHI2 estate (the "LBHI2 Application"). We previously reported that an initial hearing to address matters of case management in respect of both applications was listed in a floating three-day window beginning on 23 July 2018.
That initial hearing to consider matters of case management took place on 23 and 24 July 2018, before Mr Justice Mann (as Mr Justice Hildyard was unavailable). By way of brief update as to the outcome of that hearing:
The Judge directed that both the LBH and LBHI2 Applications should be case-managed and tried together. Given the overlapping nature of the issues raised by the Applications, the Judge agreed that they should move forward together as part of a joined-up process.
The Judge ordered that Deutsche Bank AG should be joined as a further respondent party to the LBHI2 Application. Deutsche Bank AG are already a respondent party to the LBH Application, and the Judge considered that in all the circumstances, it was appropriate that they also be joined as a party to the LBHI2 Application on condition that they bear their own costs of such participation, and that they do not duplicate the submissions of the LBH Administrators on the LBHI2 Application.
The Judge declined to order that Lehman Brothers Limited (In Administration)("LBL") should be joined as a further respondent party to the LBHI2 Application. Although recognising LBL's financial interest as a substantial unsubordinated creditor of LBH, the Judge considered that in all the circumstances it was not appropriate for LBL to be joined as a further party to the LBHI2 Application.
The Judge gave various procedural directions as to how the Applications should now move forward over the coming months, including for the parties to disclose relevant documents to one another, to exchange position papers setting out their competing arguments on the issues, and to take various other procedural steps. A copy of the Court's Order, setting out all of the various steps and the dates by which they are to be achieved, will be placed on this website when settled and approved by the Judge.
The Court's directions also provide for there to be a further procedural hearing on the first date reasonably convenient to the parties after 10 May 2019, and for there to be a trial of the Applications on a date not before 1 October 2019. When there is further clarity as to the likely dates of future Court hearings in respect of the Applications, this website will be updated accordingly.
A copy of the unedited, uncorrected transcript of proceedings at the hearing on 23 July 2018 is available through the following link.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on all substantive matters relating to the LBH Application.
Announcement of an application to Court to seek a determination on issues of priority in respect of potential distributions to holders of its subordinated debts - 3 April 2018
On 16 March 2018, the Joint Administrators of LBH made an application to Court to seek its determination on issues of priority in respect of potential distributions to holders of its subordinated debts.
The Joint Administrators of LBH have issued an application to the Court for directions, pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986, as to the priority in which the holders of LBH's subordinated debts should receive any distributions from the LBH estate (the "Application").
There are three respondents to the Application:
Lehman Brothers Holdings Inc ("LBHI");
the Joint Liquidators of LB GP No.1 Limited (In Liquidation) ("LB GP No1"); and;
Deutsche Bank A.G. (London Branch) ("Deutsche").
The Application seeks the Court's guidance in relation to the following issues:
whether the claims of LBHI under three subordinated loan facility agreements (the "Sub-Debt") have been released pursuant to a settlement agreement entered into as of 24 October 2011 between, amongst others, LBH and LBHI;
if not, whether LBHI's claims in respect of the Sub-Debt rank for distribution before, after or pari passu with any of the claims of LB GP No1 under certain fixed-rate subordinated notes issued by LBH (the "Sub-Notes");
whether any liability of LBH which might be established under certain guarantees given by LBH in favour of holders (including Deutsche) of preferred securities issued by three Lehman Brothers limited partnerships in the context of the Sub-Notes transactions ranks for distribution before, after or pari passu with each of the Sub-Debt and the Sub-Notes; and
whether or not the quantum of LBH's liability under the Sub-Notes for distribution purposes falls to be discounted under Rule 14.44 of the Insolvency (England and Wales) Rules 2016, or by reference to some other method and, if so, which method.
The application notice and accompanying witness statement in support of the Application (the third witness statement of Gillian Eleanor Bruce) are available through the following links on this page. The witness statement provides further information as to the factual background to, and issues addressed by, the Application.
The Application
Witness statement of Gillian Eleanor Bruce
Concurrent with the Application, the Joint Administrators of LB Holdings Intermediate 2 Limited ("LBHI2") issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBHI2's subordinated debts (namely, LBH and Lehman Brothers Holdings Scottish LP 3) should receive any distributions from the LBHI2 estate.
An initial hearing to address matters of case management in respect of both the Application and LBHI2's application has been listed for 1½ days in a floating three-day window beginning on 23 July 2018 before Mr Justice Hildyard.
Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBH will continue to communicate with you through this website on all substantive matters relating to the Application.
Subordinated Creditors' Claims
Lehman Brothers UK Capital Funding LP (ISIN: XS0215349357), Lehman Brothers UK Capital Funding II LP (ISIN: XS0229269856) and Lehman Brothers UK Capital Funding III LP (ISIN: XS0243852562) are funds guaranteed by LBH. Investors of these funds are entitled to submit a claim against LBH for the amount they have invested in each fund. However, the guarantee provided by LBH is subordinated to LBH’s ordinary unsecured creditors and, accordingly, any claim an investor has will be a subordinated claim. Unsecured creditors will have to be paid in full before any distribution can be made to subordinated creditors, thus lowering the likelihood of a dividend being declared to subordinated creditors. The subordinated creditors’ claims will only be adjudicated upon if the Administrators ascertain that a dividend may be payable."
