Other Notices

The administrators of LBH would like to provide creditors with updated, illustrative financial outcomes for LBH.

In summary, based on certain predictions and assumptions and subject to the usual and important caveats which creditors should bear in mind, we continue to calculate that in all illustrative scenarios, LBH and LBL would be able to pay their remaining statutory interest obligations to unsubordinated creditors in full, and there would be a return for LBH’s subordinated creditors. Any variance in the final outcome for LBH’s subordinated creditors would continue to be largely driven by the outcome of the remaining LBIE asset recoveries (including certain litigation matters).

Capitalised terms in this announcement take their meaning from previous announcements which are available on LBH’s website.

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.

Pursuant to a court order dated 16 November 2021, Derek Anthony Howell and Russell Downs were removed as Administrators of Lehman Brothers Holdings Plc. 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 2020. Following an application to Court, an Order was granted by the Court extending the Administrators’ term of office to 30 November 2022.

In the announcement jointly made by LBH and LBHI2 and their respective officeholders entitled “LBH and LBHI2 announcement following release of the High Court's judgment in the Subordinated Debt Proceedings” (the “July Announcement”), the LBH administrators noted that they were preparing an assessment of the potential economic outcomes for LBH’s creditors, applying the principles of the judgment handed down in the Subordinated Debt Proceedings and certain other assumptions, where necessary, and that they expected to share this information in due course.

The administrators of LBH are now in a position to provide such an update. This can be found below. Capitalised terms in this announcement take their meaning from the July Announcement.

Estimated financial outcomes

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 LBH 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 Joint Administrators of LBH.  

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 Bruce remain in office as Administrators.

The Administrators can advise that LBH 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 LBH's latest progress report and on LBIE's website here.

The Pensions Regulator’s determination panel previously issued a Financial Support Direction (“FSD”) against LBH and five other entities (including three other UK companies in administration), in relation to the Lehman Brothers Pension Scheme. The FSD required financial support to be provided to the pension scheme, in relation to the scheme’s deficit. LBH appealed against this decision and has been involved in an ongoing court process. The hearing to determine whether a FSD should be made, and against which entities, was due to be held at the Upper Tribunal in February 2015.

However, following a settlement agreement with the pension scheme trustees and all other potential FSD targets, which became effective on 18 August 2014, LBH no longer has a potential liability to the pension scheme.

View the Tax Strategy as per Schedule 19 (No.2) of the Finance Act 2016

The Administrators applied to Court for permission for LBH to become a distributing administration. That permission was granted on 2 May 2014, and LBH now has a formal legal process for agreeing creditors’ claims. Therefore, we have provided a LBH Statement of Claim form which can be downloaded here, and we encourage all creditors who have not already done so to submit their claims in short order. The Administrators request that all claimants use this form for consistency, and all claims should be submitted with full supporting documentation. Please execute your Statement of Claim and upload as a PDF and email to the below address.