Amicus can report some progress seems to have been made towards paying the next dividend and finalising the LBA bankruptcy. The major issues both recently resolved and outstanding are detailed below along with recent updates:
Amicus understands the dispute with Lehman Brothers International Europe (LBIE) over a drafting error in an agreement has largely been resolved. LBIE has been denied leave to appeal the UK court judgement made against them and the only issue remaining seems to be to settle the outstanding balance of costs the UK courts awarded in favour of LBA and against LBIE.
HMRC (Her Majesty’s Revenue and Customs – the UK equivalent of the ATO) has rebated withholding tax previously deducted from payments made to LBA by LBIE. This was a separate issue from the one detailed above and was largely procedural, but never-the-less this issue has now been completed
LBA is in discussions with Lehman Brothers Holdings Inc (LBHI) regarding LBHI formally dropping claims against LBA and the Trustee BNY Mellon regarding the Federation SCDO. Amicus understands LBHI has no legal basis for any claim having lost its latest appeal to the Second Circuit Court regarding the Bankruptcy Court’s original decision to summarily dismiss LBHI’s claims to any monies. However, LBA wishes to receive assurances in writing LBHI will not pursue it or BNY Mellon before releasing the Federation monies as dividends payments to creditors. LBA is rightly insistent on the case being dropped against BNY Mellon to avoid the risk of BNY Mellon making a counterclaim against LBA since as Trustee BNY Mellon was acting on LBA’s behalf and will likely have an indemnity from LBA for its actions under the Trustee agreement. The waterfall payments from the two smaller companies (LBAF and LBAH) have been agreed in principle with LBHI, but finalisation of this is pending the resolution of the other disputes between LBA and LBHI regarding Federation and the ATO.
LBA’s issue with the ATO concerning liabilities inadvertently created by LBHI’s past actions as a creditor of LBA is ongoing and appears to be complex, multi-facetted and multi-dimensional. Unfortunately, this remains the major issue and the principal one holding up the completion of the bankruptcy and the next dividend payment. Amicus suspects the monies involved are substantial and therefore being conservative (and obviously not wishing to expose itself to any personal liability) the Liquidator is holding back all monies in LBA until a solution is reached.
In the Liquidator’s last update to creditors in September 2017, the Liquidator indicated a high and low case of further recoveries of between $60 million (15c/$) and $45 million (11c/$). Amicus has not heard any news that would suggest this range is still not valid. It is obviously very frustrating there has been such a lengthy delay between now and the last dividend payment and those that have put claims in since the last dividend have not as yet received anything. The monies are still there in the Estate so it seems simply a matter of timing as to when the monies are released with the key factor being the ATO issue as more and more secondary issues are being sorted.
As the LBA bankruptcy is still not finalised, there is still a window for anyone who has not already submitted a proof of debt to do so. Under Australian bankruptcy rules, any claim accepted has first priority for any monies paid out to other successful claimants in the same class before a general dividend is declared to all creditors. So far around 60c/$ for accepted claim amounts has been distributed so this is the minimum any new claimant will recover of their accepted claim. The computation of claim amounts under the “left in hand” method used by the Liquidator is complex as it involves interest calculations at historical rates with heavy penalties between time of loss and any subsequent recoveries.
If any potential creditor has not made a claim against LBA and thinks they may have one, please feel free to contact Amicus to determine whether there is a likely claimable loss and if it sufficiently large to warrant taking any action. To have a claim, a potential creditor must have bought a structured security from Lehman Brothers Australia or its predecessor Grange Securities and not held that security to maturity where the claimant has received back full principal and interest as initially promised at the time of purchase. Any person or organisation that purchased a structured product and either sold it prior to maturity at a loss, or held it until either partial or full default will likely have a claim even if they have already received compensation from other sources such as a settlement with another Lehman organisation (such as LBSF) or from a ratings agency.