Client Assets Update - Trust Asset Claims, Trust Asset Returns and LBI SIPC Claims 7/7/2010

This update concerns the reconciliation of Trust Asset claims, the release of securities back to claimants and LBIE’s SIPC Customer Omnibus Claim against Lehman Brothers, Inc. (“LBI”).

Trust Asset Claims - Reconciliations

With the passing of the March 19 Bar Date, the administration has been working with trust asset claimants to reconcile their claims.  Whilst this is a complex process, considerable progress has been made over the last three months on this exercise which has enabled the administration to commence its programme of asset returns.

In some cases the administration has received claims to trust assets which are greater than the amounts already recorded in LBIE’s books and records - both for assets within and outside administrators control.  LBIE continues to investigate these claims to resolve their potential impact on the programme of trust asset returns.

Trust Asset - Returns

Key highlights are as follows:

• LBIE has issued Claim Agreement Notices (“CANs”) for 2,790 individual counterparty holdings of securities.  This represents £1.82 bn and 61% of the CRA assets under the control of the Administrators.  Over 74% of CRA claimants have had CANs sent to them.  This is a significant step in the progress to release assets.  This process is continuing and future CANs are forthcoming.
• Following the issuance of CANs the administration has instructed the release of 52% of the total value of securities owned by Claims Resolution Agreement (“CRA”) Signatories.  This represents £1.58 bn in value. 
• With regard to the Non CRA signatories, LBIE continues to operate a separate bespoke process which is working through these more complex and time consuming negotiations.  Since the Bar Date the administration has returned over £450m of securities to Non CRA owners. 

For further information on the Bar Date please view the 22 March Post Bar Date Client Asset update here and for additional Frequently Asked Questions with respect to the Trust Asset reconciliation process please view here.

LBIE’s SIPC Customer Omnibus Claim (“Omnibus Claim”)

As stated in the Joint Administrators’ third progress report dated 14 April 2010, a copy of which can be accessed here, over the past months, the Joint Administrators have been working to agree client claims to the US securities with LBI. The Joint Administrators and LBIE have developed a close working relationship with the SIPC Trustee and the professional advisers working for him. There are teams working in parallel to reconcile the positions shown on LBIE's records against those shown on LBI's records.  

The SIPC Trustee’s professional advisers are reconciling the Omnibus Claim on a security by security basis. There are over 5,300 individual securities lines that require reconciliation.  The Joint Administrators have currently received reconciliation templates for approximately 1,500 of these securities. This represents the majority of the market value of the securities portion of the Omnibus Claim.

At this time the reconciliation of cash claims, both in relation to securities trading and other cash balances, has not been completed. The Joint Administrators are working closely with the SIPC Trustee’s professional advisers to aid their investigations in this area.  

The Joint Administrators are currently unable to estimate when the reconciliation of the cash portion of the Omnibus Claim will be completed, but currently do not expect that to occur prior to 30 September 2010.

The SIPC Trustee has advised the Joint Administrators that the LBIE Omnibus claim cannot be determined until substantially all the securities and relevant cash amounts are reconciled.

The Joint Administrators have put a robust process in place within LBIE to verify the data provided by LBI in their reconciliation templates against LBIE books and records and to compare it against Trust Asset clients’ submissions made via the Client Asset Portal. Substantial progress has been made in processing the circa 1,500 templates received to date and as the Trustee provides additional reconciliation templates LBIE is well positioned to progress them.

For additional background information on LBI and the SIPC process please also review the Joint Administrators’ Progress Reports dated 14 October 2009 and 12 April 2009.  

Should you have any queries regarding this update, please contact LBIE’s Counterparty Communications and Management at generalqueries@lbia-eu.com.  As always, the Joint Administrators will continue to communicate with you through this website on all matters relating to the administration of LBIE.