Frequently Asked Questions for Scheme of Arrangement- 15 July 2009

1) What is the Jurisdiction Hearing? 

2) What happens after the Jurisdiction Hearing? 

3) What happens if the Application is successful, but then the Scheme is not approved by the Scheme creditors or the Court?

4) I did not receive a letter on the 26^th of June and I believe that I may be a Scheme creditor under the Scheme. What should I do?

5) Where can I get more information about the proposed Scheme and Scheme creditors?

6) Will you be using the data which I have already submitted to you as part of the Administration process?

1) What is the Jurisdiction Hearing? 

On the 14^th July 2009 the Joint Administrators made an application to the High Court concerning the jurisdiction of the Court to sanction a scheme of arrangement with respect to certain client assets held by LBIE.  To review the Client Money and Asset Update describing the Application with links to the witness statement and ancillary documents filed with the Application, including a document explaining the key terms of the scheme which the Joint Administrators are proposing to promote and a short summary of the same, click here. 

The Application will be heard on the 29^th and 30^th of July at the Royal Court of Justice in London and the hearing will be held in public.  The Court will not be determining the terms of the Scheme but will be determining the jurisdiction issue only.

2) What happens after the Jurisdiction Hearing? 

At this point you do not need to take any action. We intend to post an update following the Jurisdiction Hearing to update you of the results and to advise of the process and timetable going forward.

Assuming that the Application is successful, the Joint Administrators intend to apply to the Court for permission to hold meetings of Scheme creditors to consider, and if thought appropriate, to approve the proposed Scheme. It is intended that such meetings would take place in the autumn.

If approved by the required majorities at the Scheme meetings, the Joint Administrators would return to court to apply for court sanction of the Scheme. If the court sanctions the Scheme, all Scheme creditors would be bound by the terms of the Scheme.

As part of this process, it is intended over the next few months to provide Scheme creditors with further information regarding the Scheme, Scheme creditors' voting rights and the proposed classes that Scheme creditors will be divided into for the purposes of voting at the Scheme meetings. 

The Joint Administrators will continue to communicate with creditors through the PwC LBIE website regarding the proposed Scheme.  Further postings will be made over the course of the summer and Scheme creditors will also be contacted by post to further explain the voting processes and classes.

3) What happens if the Application is successful, but then the Scheme is not approved by the Scheme creditors or the Court?

The Joint Administrators are confident that it is in the best interests of the Scheme creditors to approve the Scheme and believe that the Scheme creditors will approve the Scheme as the quickest and most efficient method of returning client assets.  However, if the Scheme is not approved by the Scheme creditors in the meetings, or by the Court, the Joint Administrators will continue to use the current mechanism to return client assets by individual bilateral negotiation.  This will remain a lengthy process, will continue to be onerous on creditors and it will be difficult to bring finality in dealings between creditors and LBIE as a result. 

4) I did not receive a letter on the 26^th of June and I believe that I may be a Scheme creditor under the Scheme. What should I do?

The 26^th June Letter was sent by the Joint Administrators to clients who, from LBIE's records, it appears may have a claim to certain client assets. The letter was not sent to all LBIE counterparties as not all LBIE creditors will be Scheme creditors. However if you believe you have a claim to client assets and did not receive the 26th June Letter, please contact us through the Scheme of Arrangement Mailbox, re-confirming your postal address at the same time.

Please note that receiving the 26th June Letter does not necessarily mean that you will be a Scheme creditor and the Joint Administrators do not make any representation or warranty that any recipient of further information is entitled to make any claim, or that they will be a Scheme creditor, or, if so, what amount of client assets (if any) they may ultimately receive.

5) Where can I get more information about the proposed Scheme and Scheme creditors?

A summary of the principal terms and effect of the Scheme (the "Scheme Summary") was filed with the Application. The Scheme Summary includes schematic diagrams to assist the reader in understanding how it is intended that the Scheme operate.  It also includes a number of key definitions that it is intended be included in the Scheme document.  The Scheme Summary should be read in full for an overview of the Scheme's proposed key terms and effect.

6) Will you be using the data which I have already submitted to you as part of the Administration process?

Yes. LBIE will have regard to Relevant Information in determining matters under the Scheme, including the Books and Records of LBIE. This would include books, records and other information in any form.