Creditor Update - First Interim Dividend for Unsecured Creditors and Small Claims Settlement Offer - 4 May 2012

The Joint Administrators wish to provide creditors with information about the timing of the first interim dividend and to announce the proposal of a small claims settlement offer.  Accordingly, this update confirms:

1. On 2 May 2012 the court ordered that the last date for proving be brought forward to 31 July 2012 (“Bar Date”);
2. The Joint Administrators’ intention to pay a first interim dividend to unsecured creditors within five months of the Bar Date (the “First Interim Dividend”); and
3. The Joint Administrators’ intention to offer creditors the opportunity to receive a single payment as full and final settlement of their claims (the “Small Claims Settlement Offer”).

First Interim Dividend

On 2 December 2009, the UK High Court granted the Joint Administrators permission pursuant to paragraph 65(3) of Schedule B1 to the Insolvency Act 1986 to make a distribution to unsecured creditors.

On 4 December 2009 the Joint Administrators issued a Notice of Proposed Distribution on this website, requesting that unsecured creditors submit proofs of debt by 31 December 2010, in order to qualify for a dividend.

On 10 December 2010, the UK High Court granted the Joint Administrators’ request to postpone the date by which unsecured creditors must submit their proofs of debt to 31 December 2012 in light of developments in material litigation matters, notably RASCALS and Client Money.

On 2 May 2012, the UK High Court granted the Joint Administrators’ requests to:

• bring forward the bar date to 31 July 2012;
• extend the period during which payment of the First Interim Dividend must be made from two months from the Bar Date, to within five months of the Bar Date ; and
• extend the period during which the Joint Administrators are required to admit, reject or make provision for proofs of debt submitted by unsecured creditors from a period of seven days from the Bar Date, to three months from the Bar Date.

A copy of the Court Order can be found here.

Accordingly, it is the Joint Administrators’ intention to pay the First Interim Dividend by the end of 2012.

To be eligible to participate in the First Interim Dividend, to the extent they have not already done so, unsecured creditors will be required to:

• submit a valid proof of debt by the Bar Date 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 by the Bar Date does not guarantee that the claim will be capable of agreement prior to payment of the First Interim Dividend.

The rate of the First Interim Dividend has not yet been determined.

In granting the order sought by the Joint Administrators on 2 May 2012, the UK High Court directed that any creditor of LBIE has liberty to apply to the Court to vary or discharge the order on seven days’ written notice to the Joint Administrators.

Further details of the First Interim Dividend are contained within the related Frequently Asked Questions.

Small Claims Settlement Offer

It is in the interest of LBIE’s general estate, in terms of both time and cost incurred in dealing with settling claims of creditors, to offer to make a full and final settlement to all creditors (“Eligible Creditor(s)”) whose claims do not exceed £150,000 via a single payment of 90% of their agreed claim amount. Any creditor whose agreed claim amount exceeds £150,000 may also participate, but the maximum payment made will be 90% of £150,000 (i.e. a payment of £135,000).

The payment of the Small Claims Settlement Offer will be timed to coincide with the First Interim Dividend. Creditors who opt for the Small Claims Settlement Offer will not receive a First Interim Dividend (or any subsequent dividends).

This offer is available to all of LBIE’s unsecured creditors, including LBIE’s affiliates.  Further details on eligibility are set out in the Frequently Asked Questions.

In the event that an Eligible Creditor does not wish to accept the Small Claims Settlement Offer then, provided that its claim is admitted by the Joint Administrators, it will automatically be entitled to participate in the First Interim Dividend and any subsequent dividends made over the life of the Administration.

To be eligible to participate in the Small Claims Settlement Offer, to the extent they have not already done so, Eligible Creditors will be required to:

• submit a valid proof of debt by the Bar Date via the LBIE Client Information Portal;
• have their claim agreed and admitted via an executed CDD (or similar agreement);
• enter into a separate agreement to their CDD (or similar agreement) with LBIE accepting the Small Claims Settlement Offer as full and final settlement of their admitted claim; and
• provide their SSIs for a GBP bank account.

The above requirements must be completed no later than 31 October 2012.

Eligible Creditors can apply to participate in the Small Claims Settlement Offer by logging on to the LBIE Client Information Portal and clicking the button under the relevant heading to register their interest. The final decision of acceptance is at the sole discretion of the Joint Administrators.

Further details of the Small Claims Settlement Offer are contained within the related Frequently Asked Questions.

Please note that (i) the payment percentage in respect of the Small Claims Settlement Offer is not intended to reflect the Joint Administrators’ view of the final aggregate dividend for creditors who choose not to participate in the Small Claims Settlement Offer; (ii) over the entire life of the Administration, the aggregate dividends paid to unsecured creditors could be either higher or lower than the 90% being offered under the Small Claims Settlement Offer; and (iii) the First Interim Dividend will be materially lower than 90%.  We refer you to the latest LBIE progress report for the current indicative financial outcome of the Administration, together with the various notes and caveats. Payments of the First Interim Dividend and pursuant to the Small Claims Settlement Offer will be made in GBP.

Creditors should take independent advice as to whether to participate in the Small Claims Settlement Offer.

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 and which are not dealt with in the Frequently Asked Questions, please contact your existing LBIE contact or the Communications and Counterparty Management team at unsecuredcreditors@lbia-eu.com .