Update – Waterfall II Application (the “Application”) – Guidance Note on Issue 37 – 19 August 2016

As creditors may be aware, Issue 37 of the Application concerned how creditors’ claims are to be calculated where a CDD (or other agreement agreeing or admitting an unsecured claim) comprised a number of claims, with differing rates of interest applicable or in different currencies, without indicating how the agreed or admitted claim amount derived from and related to those underlying claims.  The matters with which Issue 37 was concerned are of particular practical importance to the Administrators since they arise in a significant number of cases.

Issue 37, which was included as part of Tranche A of the Application, was covered fully in the parties’ skeleton arguments before the Court. However, it was only addressed cursorily in the course of oral submissions during the Tranche A hearing. Accordingly, in order to assist the Court, the parties to the Application have, since the consequential hearing on 9 October 2015, sought to agree what is the correct legal and practical approach. Specifically, the parties sought to agree a “Note on Issue 37” with an accompanying draft order which the Court could make if it was satisfied with the position as agreed among the parties.

It has not been possible to reach agreement among the parties to the Application as to the precise terms of the Note on Issue 37 and accompanying order to be put before the Court.  However the process has nonetheless assisted the Administrators in finalising the approach they ought to take in the circumstances with which Issue 37 is concerned. 

The Administrators wish to inform creditors as to the approach they are taking in respect of the matters which have, until now, been before the Court as Issue 37 of the Application. They have therefore prepared a guidance note setting out the following matters:

1. what the relevant Issue and sub-issues are; 

2. what the Administrators consider the answers to the Issue and sub-issues are; and 

3. the approach the Administrators are taking in the circumstances with which Issue 37 is concerned. 

A copy of the guidance note is available here.

The Joint Administrators have made available to creditors their UCCs setting out the Administrators’ calculation – on the basis of the approach set out in paragraphs 10 – 13 of the guidance note – of the disaggregation of each creditor’s Agreed Claim amount. Those statements will, subject to the approach set out in the guidance note, form the basis for the Administrators’ distribution of the surplus in respect of statutory interest and non-provable claims.

Should you have any queries regarding this update, please contact LBIE’s Communications and Counterparty Management team at generalqueries@lbia-eu.com.