Lehman Australia Dividend Payment Update

Amicus understands it is the Liquidator’s intention to write to all creditors of Lehman Brothers Australia (LBA) shortly.  It is likely this report will contain an update on the Liquidator’s efforts to resolve the tax position with the Australian Tax Office (ATO) and the probable timing of the next dividend payment.  This next dividend payment will also include back dividends for any new creditors (previously paid to other creditors) whose claims were admitted post the previous dividend payment made by LBA in February 2017.

The tax position with the ATO is the major impediment to the timely payment of the next dividend and has arisen because Lehman Brothers Holdings Inc (LBHI), the US parent company in the Lehman Group and the largest creditor of LBA, took certain actions in 2015 that may have caused a technical re-organisation of LBA which potentially altered its tax status. Australian tax law was amended to address the issue of multi-national companies booking profits from their Australian operations overseas where there was a lower tax regime and therefore avoiding paying Australian taxes.  These new laws were both complex and extensive to combat the sophisticated legal structures being used.  The potential change to LBA’s tax status triggered by LBHI’s actions affected at least one of the criteria being used by the ATO being a “same business test”.  There is no accusation either LBHI or LBA intentionally took action to affect LBA’s tax status as part of a scheme to avoid paying taxes, rather LBHI’s actions had unintended consequences; being the potential negation of tax losses on the sale of assets held in the LBA business which are being used to partially offset LBA’s overall tax liability.  The Liquidator needs to provision within the estate for this potential tax liability and cannot pay another dividend until the matter is finalised.  Positively, the Liquidator has been in ongoing discussions with the ATO and is hopeful of being able to update creditors with some concrete news before Christmas or shortly thereafter.

When the tax question is settled, the Liquidator’s intention is to pay another dividend.  There are still three major financial issues to be resolved being: monies held back for claims made by LBHI regarding the Federation CDO; distribution of excess funds from two smaller LBA companies (LBA Holdings and LBA Finance); and an ongoing disagreement regarding a data error made by Lehman Brothers International Europe (LBIE) in calculating the quantum of an intercompany claim between LBA and LBIE.  The Liquidator is optimistic the first two matters will be agreed prior to the next dividend payment, but not the dispute with LBIE.  This will mean the next dividend payment will not be the final one which will need to wait for the LBIE (and all other) issues to be finalised. However, even if the Federation and smaller companies issues are not resolved our understanding is that it is the Liquidator’s intention to pay the next dividend if and when the tax issues are determined favourably regardless.

Please note if there are any differences or contradictions between statements made in this article and any official communication from the Liquidator, the Liquidator’s communication will be the most accurate and Amicus apologises for any errors made.

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