Update on OTC cash trades unsettled in CREST

The Administrators of Lehman Brothers International (Europe) (in administration) ("LBIE") wish to update counterparties of LBIE regarding unsettled OTC cash trades that were due to be settled in CREST (Euroclear UK& Ireland).

Background

The Administrators appreciate the degree of uncertainty in the market created by the unsettled OTC cash trades that were due to be settled in CREST and confirm that they are working closely with CREST and treating the resolution of this as a very important and urgent matter.

Process

Certain counterparties and customers have contacted the Administrators with proposals concerning the possible cancellation of OTC cash unsettled trades. It is currently possible for the Administrators to deal with such proposals in limited circumstances.

Accordingly, we request that, until further notice, counterparties contact the Administrators with a proposal if all of the following principles apply:

1. The counterparty will be required to pay a fee, to be agreed with the Administrators.

2. The proposal should concern OTC cash trades that were to be settled in CREST.

3. The unsettled trades must have been executed OTC, and not be subject to the default or other rules of an Exchange or Clearing House.

4. As a precondition for cancellation the counterparty will be required to lodge an amount equivalent to the net value of the cancellation in escrow, to be released on conclusion of the cancellation process.

5. Prior to agreeing to any proposal, the Administrators will require a confidentiality undertaking to be signed.

6. A standard indemnity will be required indemnifying the Administrators. Details will be provided on request.

Once these principles are satisfied, the Administrators will consider a proposal for effecting cancellation of trades.

For further details please contact: enquiries.lehmanbrothers@uk.pwc.com ensuring that the subject field is entitled OTC CASH TRADES.