General update - Lehman Brothers International (Europe) - In Administration ("LBIE") – Currency holding policy – 22 May 2017

In our 15th Progress Report dated 12 April 2016 we set out the policy on currency holdings which has continued to apply to date, as follows: 

The House Estate’s residual material currency risk relates to its potential obligation to pay Currency Conversion Claims, dependent upon the Waterfall appeals. The largest part of that potential liability is US dollar denominated. Accordingly, the Administrators intend to hold, and not convert, any future US dollar House receipts, including the pre-Administration Client Money surplus that is expected to transfer to it in due course. This policy will be kept under review as Waterfall appeal judgments are received and the quantum and composition of Currency Conversion Claims become clearer. 

We highlighted in our recent 17th Progress Report dated 10 April 2017 that the policy of holding US dollars in both the House estate and the pre-Administration Client Money estate as a currency hedge against the value of Currency Conversion Claims predominantly denominated in US dollars (in the event they were ultimately found to be admissible), would be reviewed in light of the UK Supreme Court Waterfall I appeal judgment. 

As notified last week, on 17 May 2017 the UK Supreme Court handed down its judgment in the Waterfall I Application, which amongst other matters found that Currency Conversion Claims do not exist. Based on this, we have urgently reviewed our currency holding policy and determined that the currency hedge maintained by holding US dollars is no longer merited. 

Therefore, next week, we will commence the orderly process of exchanging the vast majority of LBIE’s foreign currency balances to sterling, other than $120m which will be retained in the pre-Administration Client Money estate. This process is expected to take several weeks to implement in a controlled fashion.

Should you have any queries regarding this update, please contact LBIE’s Communications and Counterparty Management team at generalqueries@lbia-eu.com.

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