Lehman Brothers Australia – Next Dividend Payment Progress

Positively, it appears as if many of the issues we have highlighted in previous reports are progressing, but without active resources driving the liquidation process at Lehman Brothers Australia (LBA), the pace of progress is slower than it would be otherwise.  Our brief update on the outstanding details as Amicus understands them is as follows:

  • LBA is yet to lodge final tax returns with the ATO as it is still awaiting rulings from the US courts regarding carry forward losses due to changes of ownership.
  • There has been an in-principle agreement to alter the waterfall payments on LBAF and LBAH (two small companies within the Lehman Australia Group). This will realise cash for the estate but the matter, which has been outstanding for years, is still not finalised.
  • LBHI (the ultimate Lehman parent company) has indicated it will drop its claims against LBA regarding Federation.  However, it has done this in the past, but has not actually followed through.  LBA needs releases from BNY Mellon as Trustee before it can release the monies held against this liability (of approximately AUD 20 million).  It is unlikely BNY Mellon will grant LBA releases unless it receives releases itself from LBHI.  It is unclear whether these releases will be forthcoming, although the Liquidator remains optimistic.
  • LBA is still pursuing its court case against Lehman Brothers International Europe (LBIE) over a “drafting error” in their agreement to allow LBA a claim against the LBIE estate.  LBA lost the initial case but is appealing.
  • LBA has various minor claims against other Lehman companies and there is an in-principle agreement for LBHI to purchase these claims, although this has not occurred as yet.
  • Monies held by BNY Mellon against the possibility of disputes regarding the Dante Settlement in February 2013 were due to be released six years from this date in February 2019, but this had not occurred as of March 2019, but LBA is chasing this up.
  • LBA is still awaiting a partial withholding tax refund from the UK on monies it received on claims it has against LBIE. Part of these monies were classified as interest and therefore were subject to tax.  Under the taxation treaties between the UK and Australia, part of this tax paid can be reclaimed, but HMRC (the UK equivalent of the ATO) has yet to process this claim.  A recent tax ruling in the UK has helped clarify this position so this should expedite the process.
  • Although not directly related to the bankruptcy proceedings, investors in Grange Centauri Trust have received interest monies on their claims against LBIE which indicates that LBIE has paid monies recently on claims made against it which means LBA should have received monies from its claims against LBIE.

As can be seen from the points above, no issue highlighted in the Liquidator’s September 2017 update has been fully resolved, although there has been progress made on all of them.  Given the slow progress since 2017, Amicus is somewhat pessimistic regarding the timeframe to resolve some or all of the issues above and given the number of issues it is most likely some will encounter further problems.

As a result, Amicus believes it would be better for the Liquidator to make another interim dividend payment when sufficient monies become available in the estate rather than trying to resolve all issues before making a single effectively final dividend payment.  However, which way to go is ultimately the decision for the Liquidator.

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