Other Notices

Pursuant to a court order dated 16 November 2021, Derek Anthony Howell and Russell Downs were removed as Administrators of LBHI2. The change took effect on 30 November 2021.

Edward John Macnamara, Gillian Eleanor Bruce and David James Kelly remain in office as Administrators.

The Administration was due to expire on 30 November 2022. There being various matters that the Administrators consider ought still to be addressed in the context of the administration, and following an application to Court, an Order was granted by the Court extending the Administrators’ term of office to 30 November 2025.

The Administrators’ appointment in respect of LB Holdings Intermediate 2 Limited (in administration) is currently due to expire on 30 November 2022. The Administrators indicated in their 27th Progress Report that they expected in due course to apply further to extend the administration. There being various matters that the Administrators consider ought still to be addressed in the context of the administration, the Administrators intend shortly to apply to court for an Order, pursuant to paragraph 76(2)(a) of Schedule B1 to the Insolvency Act 1986, that their term of office be extended until 30 November 2025.

If any creditor or other stakeholder has any queries or concerns in this respect, they should please contact Andrew Maran, telephone number 020 7583 5000, as soon as possible.

The Administration was due to expire on 30 November 2020. Following an application to Court, an Order was granted by the Court extending the Administrators’ term of office to 30 November 2022.

This announcement is made on behalf of LBH and LBHI2 and their respective officeholders, following the handing down of Mr Justice Smith’s judgment in the Subordinated Debt Proceedings on 3 July 2020.  Capitalised terms are defined at the end of this announcement.  

Mr Justice Smith’s judgment follows a hearing in November 2019. The High Court has delivered a ruling on a number of issues, being the relative ranking of subordinated debt instruments issued by each of LBHI2 and LBH, the question of whether or not certain subordinated claims in LBH held by LBHI have been released, and the issue of whether or not the LBH Sub-Notes should be discounted. 

Summary of the judgment

The findings of Mr Justice Smith are as follows:  

• at LBHI2, LBH’s subordinated debt claim ranks senior to that of SLP3;  

• at LBH, the LBH Sub-Notes and the claim of LBHI rank pari passu; 

• LBHI’s claim against LBH was not released by the terms of the 2011 Settlement Agreement between (among others) LBH and LBHI; and 

• the LBH Sub-Notes are subject to the discounting mechanism set out in the Insolvency Rules 2016. 

A copy of the judgment and a more fulsome summary of it can be found below:

Court Judgment

Short summary

A hearing to deal with consequential issues has been listed for 24 July 2020.

Commercial consequences

Subject to any appeal, the judgment provides greater clarity as to the payment flows within the UK Lehman group. 

In addition, there are other commercial matters which will have a bearing on what the final outcomes for creditors of the UK Lehman group will be.  These include: 

• the quantum of further distributions by LBIE;

• the quantum of expense liabilities in various UK Lehman estates, including in relation to tax; and

• the outcome of the US Clawback Litigation. 

Each of the items set out in the non-exhaustive list above contributes, along with the matters determined in the judgment, to the complexity in forecasting the final outcome for creditors. The administrators of LBH are preparing an assessment of the potential economic outcome, applying the principles of the judgment and certain other assumptions, where necessary, and expect to share this information in due course.

Scope for a consensual resolution

The judgment provides interested parties and stakeholders with an opportunity to consider the benefits of pursuing a consensual resolution of the issues in the Subordinated Debt Proceedings and all remaining open issues across the UK Lehman estates.  

The administrators of LBH and LBHI2 believe there is merit in exploring views of stakeholders regarding a consensual resolution to these issues and wish to engage with key parties towards this objective.  

Parties who have an interest in participating in these discussions are invited to contact the administrators of LBH at uk_lehmanaffiliates@pwc.com. 

Definitions

LBH means Lehman Brothers Holdings Plc (in administration). 

LBH Sub-Notes means four sets of subordinated notes issued by LBH to certain limited partnerships in 2005 and 2006. 

LBHI means Lehman Brothers Holdings Inc.

LBHI2 means LB Holdings Intermediate 2 Limited (in administration). 

LBIE means Lehman Brothers International Europe (in administration). 

SLP3 means Lehman Brothers Holdings Scottish LP3. 

Subordinated Debt Proceedings means the application of the administrators of LBHI2 for directions, such application having claim number CR-2009-000052, and the application of the LBH Administrators for directions, such application having claim number CR-2008-000026, in relation to the (among other things) the relative priority of subordinated claims in each estate. 

US Clawback Litigation means an adversary proceeding in the U.S. Bankruptcy Court for the Southern District of New York filed by Lehman Brothers Holdings Inc. on April 30, 2019 against each of LBHI2, Lehman Brothers Limited (in administration), Eldon Street Holdings Limited (in administration) and MBAM Investor Limited. 

The approval of Lehman Brothers International (Europe)'s Scheme of Arrangement, pursuant to Part 26 of the Companies Act 2006 and the retirement of Tony Lomas from PwC LLP provided an opportunity for the named office-holders to be reviewed in LBHI2 and elsewhere in UK Lehman Brothers' affiliates.  Accordingly, an application to court was made to make certain changes. Pursuant to a court order dated 2 July 2018, Anthony Victor Lomas, Steven Anthony Pearson and Julian Guy Parr (the "Outgoing Office-Holders") were removed as Administrators of LBHI2.

The Outgoing Office-Holders were replaced with Ian David Green, Russell Downs and Edward John Macnamara which took effect on 16 July 2018. Derek Anthony Howell and Gillian Eleanor Bruce remain in office as Administrators.

On 10 July 2017, the Administrators reported that they anticipated making an application to court for an order that they be at liberty to enter into the proposed settlement agreement in the week commencing 17 July 2017.

The High Court hearing has now been listed for Monday, 24th July 2017, to be heard contemporaneously with applications to be made by the administrators of Lehman Brothers International Europe and Lehman Brothers Limited.

Should you have any queries regarding this update, please contact Bryony Ball.

Tel: +44 (0)20 7213 3731

On 29 March 2017, the Administrators reported that LBHI2, together with certain other Lehman UK affiliates, had been exploring commercial terms for the settlement of the Waterfall III litigation proceedings.

Following the Supreme Court judgment in the Waterfall I litigation proceedings, discussions between the parties have been ongoing. The Administrators are optimistic that a proposal will be agreed which will:

• Compromise the Waterfall III litigation proceedings.
• Enable LBHI2 to make a substantial distribution to its existing creditors.

In anticipation of a proposal being agreed, the Administrators obtained an order from the court on 15 June 2017 that they be permitted to make interim distributions to creditors. A copy of the order can be found here.

Having regard to all the circumstances, the Administrators have concluded that the prospect of (a) LBIE going into liquidation and (b) thereafter a contribution claim arising is highly unlikely in the near to mid term and that the interests of their present creditors are best served by making a first interim distribution without making a reserve for a prospective contribution claim.

The LBHI2 Administrators anticipate making an application to court for an order that they be at liberty to enter into the proposed agreement on those terms. Subject to the availability of court time, they presently anticipate that any such application will be made in the week commencing 17 July 2017.

Should you have any queries regarding this update, please contact Bryony Ball.

Tel: 020 7213373

The Administrators can advise that LBHI2 together with certain other Lehman UK affiliates have been exploring commercial terms upon which the Waterfall III litigation proceedings might be settled. Those discussions remain ongoing however, the parties have developed the outline of a proposal which would compromise both the Waterfall III proceedings and any underlying claims against the contributories of LBIE. If this proposal can be successfully implemented, it is likely to accelerate distributions to unsecured creditors. LBIE has published notice of the proposed outline settlement on its website here.

Further background information is available on LBHI2's progress reports and on LBIE's website here.

The Administrators applied to Court for permission for LBHI2 to become a distributing administration. That permission was granted on 15 June 2017, and LBHI2 now has a formal legal process for agreeing creditors’ claims. Therefore, we have provided an LBHI2 Statement of Claim form which can be downloaded here. The Administrators request that all claimants use this form for consistency and future evaluation. All claims should be submitted with full supporting documentation. Please execute your Statement of Claim and upload as a PDF and email to the following address: uk_lehmanaffiliates@pwc.com. Claims received by the Administrators will be held on file for future adjudication.