Replies to post #1051 on Got Parlay?

[VivaLasVegas]

for some reason I can't open that UK settlement link. Odd, that's been happening recently and never has before.

Could you post the text possibly?


Thank you.


Cheers

[rainbow1111]

LBIE unsecured creditor scheme to be unveiled by end of June
Author: Christopher Whittall
Source: Risk magazine | 03 Feb 2010
Categories: Derivatives, Counterparty Credit Risk
Topics: Lehman Brothers, bankruptcy, PricewaterhouseCoopers (PwC), liquidation

PricewaterhouseCoopers (PwC), the administrator for Lehman Brothers International (Europe) (LBIE), aims to unveil a scheme of arrangement for unsecured creditors by the end of June. The move could see unsecured LBIE creditors begin to receive cash payments from the administrators in 2011.

Advertisement
If a scheme can be agreed by the end of the second quarter 2010, we could be paying out cash to creditors during 2011
"An unsecured scheme of arrangement would provide a framework for the valuation and admission of claims against LBIE. We are aiming to consult representatives of the creditors over the coming weeks and months with a view to presenting the scheme to all LBIE unsecured clients towards the end of the second quarter," Steven Pearson, joint administrator for LBIE and a partner at PwC in London, told Risk in an exclusive interview.

A scheme of arrangement is a contractual mechanism to provide creditors with a finite, agreed claim by compromising their initial claims with those of LBIE. Pearson says the LBIE scheme is likely to include common methodologies to determine unsecured claims, govern termination and calculate close-out amounts under all financial contracts, and define the way in which disputes are handled. The scheme will also incorporate a bar date – or deadline – for the filing of unsecured claims, he says.

Subject to court approval, 75% in value and 50% in number of each class of creditor would need to approve the scheme to bind all unsecured creditors to it. Once the scheme is approved and claims have been agreed, the cash realised in the LBIE estate can be distributed.

"The reason unsecured creditors should consider agreeing to a scheme is simple: it has the potential to vastly accelerate the speed at which claims can be agreed and the assets distributed. Under a scheme, individual creditors will be required to make small compromises, but the benefits outweigh these compromises," says Pearson.

"If a scheme can be agreed by the end of the second quarter 2010, we could be paying out cash to creditors during 2011. The alternative to a scheme is bilateral settlement with more than 6,000 counterparties, which will require the same issues to be revisited many times over. Inevitably, that has the potential to be a long, drawn-out process."

A critical step is securing agreement between the administrators and creditors on the valuation of positions. Pearson says the book value of unsecured creditor claims on LBIE at September 15, 2008 was around $33 billion. However, the turbulence in financial markets in the immediate aftermath of LBIE's insolvency, with credit spreads and bid-offer spreads widening, resulted in unsecured creditors' claims against LBIE increasing, in some cases very materially, Pearson says.

The launching of an unsecured scheme of arrangement would be a further sign of the rapid progress made in the LBIE administration compared with the winding down of other Lehman affiliates. Lehman Brothers Inc – the US equivalent of LBIE – has yet to unveil plans to return trust assets to secured creditors, despite having recourse to the Securities Investor Protection Act 1970, a US legal framework established specifically for winding down broker-dealers.

In contrast, the LBIE administration is on the brink of launching the Claims Resolution Agreement (CRA), a consensual scheme to expedite the return of trust assets to secured creditors of LBIE. The CRA achieved the administrators' self-set threshold of 90% of creditor approval by the deadline of December 29, 2009. Distribution of assets under the CRA will commence once the bar date for claims has expired on March 19.

"Only about 40% of qualifying trust creditors had approved the CRA by December 24, 2009, but the PwC team worked closely with clients over December 28 and 29 and managed to reach the 90% threshold with room to spare. It is testament to the exceptional work of the PwC, LBIE and Linklaters team, and the collaborative efforts of the creditors' committee that we got there," says Pearson.

"It also demonstrates the benefit of having a flexible legal system, which allowed us to tailor a mechanism to return these assets. Now it is up to the trust creditors to provide all the information to us to ensure positions get reconciled and to enable us to finally get the assets back to clients."