Update - Waterfall II Application (the “Application”) – Tranches A and B – Supplemental Issues – 23 December 2015

As explained in previous updates, further to the judgments of Mr Justice David Richards in relation to Tranches A and B of the Application and pursuant to the consequential issues hearing before the Judge on 9 October 2015, the parties intend to make further written submissions on a number of issues.

Supplemental Issue 1(b) asks the Court:

“How is an independent right to interest that ‘arises outside or other than from the administration’ to be determined when calculating interest on a non-provable Currency Conversion Claim if such a rate would only accrue on a debt that was contingent or future at the Date of Administration if some action was taken after the Date of Administration? How are such rights to be assessed if the creditor did not in fact exercise such rights?”

Supplemental Issue 1(c) asks the Court:

“In a case where contractual interest first starts to run on a provable debt at some point after the Date of Administration, is the “rate applicable” for the period from the Date of Administration to the date when contractual interest first starts to run:

i. the rate of interest which is payable once the interest is running (so that such rate is treated as being applicable for the whole of the post-administration period); or

ii. a zero rate".

Further for the purposes of Rule 2.88(9) should Statutory Interest be calculated by assessing the greater of the "rate applicable" and Judgments Act 1838 rate separately for the periods prior to and post the commencement of contractual interest or should such assessment be performed taking the periods together."

Supplemental Issue 2 asks the Court:

“Whether and (if so) in what circumstances and in what manner a Currency Conversion Claim can arise from the discharge of a debt by way of set-off pursuant to Rule 2.85(3)”.

Supplemental Issue 3 asks the Court:

“Whether, and if so to what extent, a non-provable claim to interest on a Currency Conversion Claim should be reduced by interest received by the creditor pursuant to Rule 2.88 on its proved debt”.

Supplemental Issue 4 asks the Court:

“Whether, to the extent that a creditor has a non-provable claim for interest, such non-provable claim has been released under the terms of the CRA and/or a CDD and if so, whether the Administrators would be directed not to enforce such release(s)”.

Supplemental Issue 5 asks the Court:

“Whether, to the extent that a creditor has a non-provable claim for interest on a Currency Conversion Claim, such non-provable claim has been released under the terms of the CRA and/or a CDD and if so, whether the Administrators would be directed not to enforce such release(s)”.

Mr Justice Richards has agreed that these issues should be considered by him by way of written submissions in the first instance.

The timetable for written submissions on Supplemental Issue 1(b) has been agreed as follows:

York to file written submissions by 22 December 2015;
the Senior Creditor Group, Wentworth and the Joint Administrators to file written submissions by 13 January 2016; and
the Joint Administrators and the Respondents' to file reply written submissions (if any) by 20 January 2016.

In respect of the remaining Supplemental Issues, written submissions will be made in accordance with the following timetable:

Respondents to file written submissions by 22 December 2015;
the Joint Administrators to file written submissions by 13 January 2016; and
Respondents to file reply written submissions (if any) by 20 January 2016.

In accordance with these timetables, the following written submissions were filed yesterday, 22 December 2015:

On 21 December 2015, York also filed reply written submissions in respect of Supplemental 1(a), which asks the Court:

“Whether, and in what circumstances, the words ‘the rate applicable to the debt apart from the administration’ in Rule 2.88(9) of the Rules include, in the case of a provable debt that is a close-out sum under a contract, a contractual rate of interest that began to accrue only after the close-out sum became due and payable due to action taken by the creditor after the Date of Administration”.

A copy of York's reply written submission can be found here.

The Senior Creditor Group did not file reply submissions on Supplemental Issue 1(a).

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