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Lehman Brothers International (Europe) – Payment of fourth interim dividend to unsecured creditors

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Marshall Jennifer
Jennifer Marshall

Partner

London

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Paul Cluley

Partner

London

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07 March 2014

The administrators of Lehman Brothers International (Europe) (LBIE) have announced that they will pay a fourth interim dividend of 7.8 pence to unsecured creditors no later than 28 May 2014, with the current intention being to pay the dividend on or around 30 April 2014. The fourth dividend payment will take the cumulative dividend declared and paid by LBIE to 100%. Issues concerning the surplus in the administration remain to be resolved.

Payment of fourth interim dividend

Claims in LBIE's administration can broadly be split into three categories: (i) unsecured claims; (ii) client money claims; and (iii) client asset claims. This bulletin relates to the first of the above categories.

On 28 February 2014 the administrators announced that a fourth interim dividend will be paid to LBIE’s unsecured creditors of 7.8 pence in the pound no later than 28 May 2014, with the current intention to pay the dividend on or around 30 April 2014. In order to be eligible to take part in this dividend payment the creditor must have had their unsecured claim agreed and admitted in LBIE’s administration by 28 March 2014.

In order to have an agreed and admitted claim in the LBIE administration the following must have occurred:

  • a valid proof of debt (PoD) must have been submitted via the creditors' portal;
  • the claim must have been assessed by LBIE;
  • the claim must be agreed with the administrators (i.e. the creditor must have executed a Claims Determination Deed (CDD) or similar agreement); and
  • standard settlement instructions must have been provided for a GBP bank account.

All unsecured creditors that have submitted PoDs will receive a written notice of the declaration of the fourth interim dividend prior to the distribution setting out certain matters including:

  • the formal confirmation of the 7.8 pence dividend rate;
  • the total amount of dividend being distributed in respect of admitted claims; and
  • the level of reserves for unsettled claims.

In order to take part in the fourth interim dividend, those creditors whose claims have already been agreed and admitted in LBIE's administration (i.e. through a CDD or equivalent) and who have already provided standard settlement instructions need only confirm through the LBIE portal that: (i) the standard settlement instructions remain the same (or provide new details if they have changed); and (ii) they remain the owner of the claim.

Taxation matters (in particular US withholding tax) may reduce or delay the payment of interim dividends to certain creditors. Such creditors should receive direct communication from the administrators if they are affected by such matters.

Clients who are in a position to progress the admittance of their unsecured claim in the LBIE administration are strongly urged to do so prior to the 28 March 2014 deadline. Clients who are unable to agree their claim and have it admitted in the LBIE administration in time for the fourth interim dividend payment (i.e. by 28 March 2014) will, however, be able to receive catch up payments (for the first, second, third and fourth interim dividends) in due course once their claim is agreed and admitted.

There remains no hard bar date for filing claims against LBIE and it is, therefore, still possible to submit a PoD. Any clients yet to submit a PoD are strongly urged to do so as soon as possible. Further, clients who have submitted a PoD but are yet to agree their claim with LBIE are strongly urged to progress matters. While LBIE’s administration still has some time to run it is clear that the administration is entering into its more final stages (with many issues that were proving to be sticking points resolved) and therefore any negotiations with LBIE concerning claims admittance should now be prioritised (especially as there is a 100% dividend available for unsecured creditors and, we understand, that litigation in respect of unresolved claims is an option the administrators are more willing to explore at this stage of the administration).

Further distributions to unsecured creditors

Further dividend payments beyond the 100% level are not expected until creditors’ rights to the surplus are resolved. This is dependent on issues relating to the waterfall application1  and may involve compromise among creditors and/or further litigation. A further announcement from the administrators is awaited and additional information on this topic may be included in the eleventh progress report which is due to be published in mid-April 2014.

Footnotes

  1. The waterfall application concerned the status of claims filed by LBIE’s shareholders and those shareholders’ obligations to contribute to the debts of LBIE, together with a number of questions on the ranking of claims in the event that the LBIE’s funds for distribution are sufficient to settle in full the provable claims of ordinary unsecured creditors (which has turned out to be the case). The court has now issued its conclusions on the questions asked and a full written judgment will be handed down on 14 March 2014. For further background on the waterfall application click here.

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