Ninth Announcement in respect of the settlement of the Omnibus Claim - 01/08/2013

Introduction

Following our Eighth communication dated 3 July 2013 and the issuance of a Notice of Intended Distribution on 11 July 2013 this Ninth Announcement provides customers with an update on:

  • Eligibility
  • Distribution
  • US withholding tax

Eligibility

As previously communicated we intend to remit a first interim distribution under the Common Terms on or around 26 September 2013.

The Cut-Off Date for eligibility has now passed. LBIE is pleased to announce that recent intensified engagement and communication with counterparties has resulted in 219 (81%) by number and $7,778m (95%) by Best Claim Value of the consenting population being eligible to participate at this time. Those counterparties currently eligible to participate in the first interim distribution otherwise referred to as Qualifying Consenting Beneficiaries as defined in clause 9.5 of the Common Terms have been notified on the client portal.

Counterparties that are ineligible will not participate in the first interim distribution. In the majority of cases ineligibility has arisen as a result of a counterparty being non-consenting or because of unresolved debts or claims positions between the counterparty and the wider administration where LBIE has not exercised discretion to allow inclusion in the distribution.

If LBIE has knowledge that beneficiaries cease or may cease to meet all of the relevant Eligibility Criteria as set out in clause 9.4.1 of the Common Terms during the period up until the first interim Distribution Date, they will become ineligible and will no longer be able to participate. In order to reduce the likelihood of becoming ineligible counterparties are encouraged to;

  • Ensure the tax form declarations remain current and that there is no change in beneficial ownership, and;
  • Respond swiftly to any further requests for information and documentation.

Distribution

The Available Fund after adjustment for reserves is sufficient to provide a first interim distribution equal to 100% of the Best Claim amount of Qualifying Consenting Beneficiaries. We are pleased to report that this is at the upper end of the previously quoted range of ‘in excess of 90%’. This reflects continued successful liquidation of the Omnibus Trust Assets and a reduction in general provisions.

LBIE would like to draw your attention to the following planned dates ahead of the first distribution (the following dates are based on or around a targeted 26 September distribution).

  • All Qualifying Consenting Beneficiaries must from 5 August 2013, enter or reconfirm their previously submitted USD SSI details via the Client Asset Portal by close of business New York time on 7 August 2013.
  • The Notice of Distribution to Qualifying Consenting Beneficiaries will be communicated on or around 23 August 2013. This notice will include counterparty specific information on Gross Distribution, deductions and reserves.
  • Beneficiaries’ ability to raise a Common Terms Dispute in respect of each disputed Notice of Distribution figure will cease five business days subsequent to the issuance of the Notice of

There are no immediate plans for catch up distributions although this will be revisited after the first interim distribution. Further distributions are only likely to occur after the US Withholding tax treatment of customer distributions is finally determined by the US Internal Revenue Service (“IRS”),claims of non consenting parties concluded and remaining reserves settled. 

LBIE is intending to provide an update with regards to the expected outcome of the Omnibus Trust post the first interim distribution. In the meanwhile, the previous upper end estimate remains fitting (subject to the accompanying assumptions and caveats).

US withholding tax

As set out in the Eighth Announcement, LBIE has requested guidance from the US Internal Revenue Service (“IRS”) with regard to the character and source of the settlement payments. LBIE has previously communicated that due to the complexity and uniqueness of the arrangements, this issue is expected to take some time to resolve conclusively. This expectation remains unchanged, although we continue to make progress.

This being said, given the character and source of the payment for US federal income tax purposes remains outstanding, LBIE will reserve 30% of any first interim distribution paid except to the extent the payment is paid to a Qualifying Consenting Beneficiary that has provided a validly executed U.S. Form W-9 , Request for Taxpayer Identification Number and Certification, or to the extent the payment is otherwise attributable to a beneficial owner that has provided a validly executed Form W-9. for example, where the payment is made to an intermediary and the payment can ultimately be allocated and attributed to a beneficial owner that has provided a Form W-9.

Once the US Withholding tax treatment of customer distributions is finally determined by the IRS, we should be in a position to release any excess reserves made in respect of US withholding taxes back to customers, net of the appropriate tax. We remain hopeful that we may be able to conclude this by the end of 2013 so that amounts may be timely reported for US federal income tax purposes and further distributions made to counterparties.

Important Notice – US tax

To ensure compliance with Treasury Department Circular 230, customers are notified that: (a) any discussion of US federal tax issues in this announcement is not intended or written to be relied upon, and cannot be relied upon, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; (b) such discussion is included herein by LBIE in connection with the promotion or marketing (within the meaning of Circular 230) by LBIE of the transactions or matters addressed herein; and (c) you should seek advice based on your particular circumstances from an independent tax adviser.

Important Disclaimer

The information and contents of this update communication are being provided to you by LBIE for discussion purposes only. This update does not constitute a commitment or offer on the part of LBIE or its Joint Administrators, and should not be construed as such, nor does it constitute any form of advice to the recipients. The contents of this communication are based on analysis by LBIE , which has not been audited and LBIE reserves the right without specifying any reasons to amend all or part of this communication.

Any party (including any recipients) who obtains access to and chooses to rely on this update communication (or any part thereof) will do so entirely at its own risk. No person has, nor is held out as having, any authority to give any statement, warranty, proposal or undertaking on behalf of LBIE or its Joint Administrators in connection with this communication.

LBIE and its Joint Administrators will be under no obligation to provide the recipients with access to any additional information, to update this document or to correct any inaccuracies in it which may become apparent.

LBIE and its Joint Administrators, and their respective officers, employees and agents disclaim any liability which may arise from this communication, or any other written or oral information provided in connection herewith, and any errors and/or omissions herein or therein.

Nothing contained in this update communication is an acknowledgement of any claim that a recipient or any other claimant may have against LBIE or any other entity. Neither LBIE nor its Joint Administrators shall have any liability to any recipient or to any other person in respect of the information contained herein or for any defect or incompleteness in it. No representation is made by LBIE or its Joint Administrators about any claim that may be asserted against LBIE in respect of the LBI positions or any shortfall in recovery of the LBI positions.