Update – Statutory Interest Lacuna - 10 November 2017

The Joint Administrators provide below an update in respect of their commitment to complete and achieve the objectives of the Administration including the payment of interest once those amounts are capable of definitive calculation.  The Joint Administrators set out at a high level in their recent webinar a new development in that regard and are now able to give fuller details. 

In the Supreme Court’s judgment in Waterfall I, it was held that any statutory interest to which creditors have become entitled in LBIE’s administration (that remains unpaid) may not be claimed in a subsequent liquidation (known as the “Statutory Interest Lacuna”). On 23 June 2017 the Joint Administrators posted an update in which they stated that they “will object to any attempt by any party to force the premature liquidation of LBIE, as they consider that this would not be in the interests of LBIE’s creditors as a whole.” 

On 24 October 2017, Wentworth Sons Sub-Debt S.a r.l. (“Wentworth”), a creditor of LBIE, wrote to the Joint Administrators, purportedly pursuant to paragraph 56(1) of Schedule B1 to the Insolvency Act 1986, to seek a creditors’ decision to bring about the termination of the administration of LBIE and the commencement of a liquidation (the “paragraph 56(1) request”). This followed earlier correspondence with their legal representatives in relation to the question of winding up LBIE in advance of completing the on-going litigation in respect of the Surplus. 

The Joint Administrators’ response on both occasions was consistent with the position explained in the 23 June update.  They have made clear that they would not accede to the paragraph 56(1) request without first seeking directions from the Court on the basis that it would not be in LBIE’s creditors’ interests.  Moreover, they consider there to be significant legal questions arising in respect of the paragraph 56(1) request.  They invited an immediate withdrawal of the paragraph 56(1) request and if this was not forthcoming, the Joint Administrators indicated to Wentworth that they would seek the Court’s directions. 

Below is the correspondence with Wentworth and its legal representatives, a link to which can be found here:

1. Letter from Kirkland & Ellis International LLP to Linklaters LLP dated 30 June 2017; 
2. Letter from Linklaters LLP to Kirkland & Ellis International LLP dated 23 August 2017; 
3. Letter from Wentworth Sons Sub-Debt S.a r.l. to the Joint Administrators dated 24 October 2017;
4. Letter from Linklaters LLP to Kirkland & Ellis International LLP dated 30 October 2017; 
5. Letter from Kirkland & Ellis International LLP to Linklaters LLP dated 6 November 2017; and 
6. Letter from Linklaters LLP to Kirkland & Ellis International LLP dated 10 November 2017. 

In light of Wentworth’s refusal to withdraw the request, the Joint Administrators are preparing an application to the Court for directions pursuant to paragraph 63 of Schedule B1 to the Insolvency Act (the “Application”). Wentworth will be named as respondent to the Application.   

Should you have any queries regarding this update, please contact LBIE’s Communications and Counterparty Management team at generalqueries@lbia-eu.com. The Joint Administrators will continue to communicate with you through this website on all matters relating to the Application and the administration of LBIE.