9 November Creditor Update - First interim dividend to unsecured creditors, progress with claims agreement, “catch up” dividend and re-issue of the Small Claims Settlement Offer

The Joint Administrators wish to provide creditors with an update relating to:

1. payment of the first interim dividend and Small Claims Settlement Offer (“SCSO”);
2. progress in agreeing creditors’ claims; and
3. announcement of the Joint Administrators’ intention to pay a first “catch up” dividend to creditors whose claims were not admitted in time to participate in the first interim dividend, as well as a further opportunity for creditors to participate in the SCSO.

Payment of first interim dividend and SCSO

The Joint Administrators confirm that payment of the first interim dividend and SCSO will be on or around 30 November 2012.

The rate for the first interim dividend has been determined at 25.2%.

For those claims that have not yet been agreed by LBIE, the Administrators have made a prudent reserve in accordance with Rule 2.70(1)(b) of the Insolvency Rules 1986.

Claims agreement

Significant progress has been made in agreeing and admitting claims.  We summarise below the progress made as at 2 November 2012:

* Note: A number of creditors have incorporated within their total unsecured claim, contingent claims arising from Client Asset shortfalls. We have not sought to disaggregate these at this stage.  However, where claims have been specified as being contingent unsecured claims, they have not been reflected in the above table.

Note: The movement in submitted Proofs of Debt reflects the net impact of the withdrawal of certain claims and any new claims filed subsequent to the bar date

In summary:

• 1,598 unsecured creditor claims have been agreed, with a total value of £7.3bn.  By comparison, as at 14 September 2012, 732 claims with a total value of £3.9bn had been agreed.
• Of the agreed claims, all except 8 Street creditors and 8 Client Asset claimants (total value: £0.3bn) have been admitted for dividend purposes.
• The admitted claims include 654 counterparties (total value: £28m) that elected to participate in the SCSO.
• Offers have been made to a further 689 counterparties with a value of £1.3bn, however these have not as yet been agreed or admitted.  LBIE continues to work with these counterparties in order to progress the agreement of their claims.

40 admitted creditors (total value: £1bn) are unlikely to receive a dividend at this stage, as certain Lehman affiliates have asserted claims to the dividend payment pursuant to liens purportedly granted by the affected creditors prior to insolvency. The dividend payments will be reserved for, pending the resolution of this issue.

“Catch up” dividend

As previously advised, the deadline for creditors wishing to participate in the first interim dividend and SCSO was 2 November 2012.  Consequently, any claims that had not been admitted by that date will not participate in November’s payment of the first interim dividend or SCSO.

However, it is the Joint Administrators’ intention to pay a “catch up” first interim dividend in February 2013 to creditors who missed the 2 November deadline and whose claims are subsequently admitted.

To be eligible to receive a “catch up” dividend in February 2013, unsecured creditors must have met the following conditions by 31 January 2013:

• submit a valid Proof of Debt via the LBIE Client Information Portal;
• have their unsecured claim agreed and admitted via an executed claims determination deed (“CDD”) (or similar agreement); and
• provide their standard settlement instructions (“SSIs”) for a GBP bank account.

Please note that submission of a valid Proof of Debt does not guarantee that the claim will be capable of agreement prior to the 31 January 2013 deadline.

Re-issue of SCSO

Given the success of the SCSO, the Joint Administrators are re-issuing the offer to creditors such that they can elect to receive a single payment in full and final settlement of their claims against LBIE.

The offer is available to all creditors whose claims were not admitted in time to participate in the first interim dividend or the first SCSO (“Eligible Creditors”).

Under the SCSO, the Joint Administrators are offering to make a full and final settlement to all Eligible Creditors whose claims do not exceed £150,000 (or who wish to cap their claim at this level), via a single payment of 90% of their agreed claim amount i.e. up to a maximum payment of £135,000.

In the event that an Eligible Creditor does not participate in the SCSO, provided that its claim is admitted by the Joint Administrators by 31 January 2013, it will be entitled to participate in the “catch up” dividend, as well as any dividends thereafter.

To participate in the SCSO, in addition to the requirements listed above, Eligible Creditors will be required by 31 January 2013 to enter into an additional agreement with LBIE accepting the SCSO as full and final settlement of their admitted claim. SCSO payments will be made in February 2013.

Other matters 

Creditors should note that:

• to be eligible to receive the first interim dividend, unsecured creditors with admitted claims must (to the extent they have not already done so) provide their GBP SSIs via LBIE’s Client Information Portal; and
• although the Bar Date has now passed, any unsecured creditor who has yet to submit a Proof of Debt via the LBIE Client Information Portal  is encouraged to do so as soon as practicably possible.

Should you have further questions regarding the Small Claims Settlement Offer please email smallclaimsoffer@lbia-eu.com. For all other queries relating to the content of this update please contact your existing LBIE contact or the Communications and Counterparty Management team at unsecuredcreditors@lbia-eu.com.