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
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.
