Client Asset Update - Joint Administrators' Presentation to Members of MFA and AIMA 8 and 9 October 2009

This update concerns the presentation given by the Joint Administrators to members of the MFA in New York on 8 October 2009 and also to AIMA in London on 9 October 2009. The objective of the presentations was to provide members of the industry bodies who may have an interest in the trust assets held by LBIE with an overview of the Joint Administrators' proposed strategy for the continued return of such assets.

Please see the update posted on this website for background information on the strategy for return of client assets.

As previously explained, the Joint Administrators made an application to the High Court concerning the jurisdiction of the court under Part 26 of the Companies Act 2006 to sanction a scheme of arrangement (the "Scheme") with respect to certain client assets held by Lehman Brothers International Europe ("LBIE").

A public hearing of the application took place before Mr. Justice Blackburne at the Royal Courts of Justice on 29 and 30 July 2009. The High Court handed down its judgment in relation to the application on 21 August.  Mr. Justice Blackburne concluded that, "Insofar as the Scheme is concerned with the distribution by LBIE of property held or controlled by it on trust for its clients (and seeks to do so in ways that will vary or, in some cases, extinguish those rights), there is no jurisdiction to enable this to be done, so as to bind dissentients..." under Part 26 of the Companies Act 2006. 

The Joint Administrators have appealed the High Court judgment. As the judgment had an adverse effect on the interests of many of LBIE's clients, a request was made for the hearing of the Appeal to be expedited. This wish has been granted by the Court of Appeal and it is expected that the hearing will take place on 26 October 2009.

However, as mentioned in earlier updates, the Administrators are anxious that the appeal process should not lead to any unnecessary delay in the return of client assets. Therefore, in parallel with the appeal process, they are developing alternative proposals that would also assist with the return of client assets, whether or not the appeal is ultimately successful. In addition, they will continue to make bilateral returns. Although the Scheme is the most fully encompassing and preferred solution for the return of creditor assets, and that is why the judgment has been appealed, these other proposals will retain many of the Scheme provisions. Accordingly, the Joint Administrators have been actively discussing with their lawyers and the Scheme working group members these alternative options which could be utilised to expedite the return of trust property irrespective of the appeal decision.

Work is ongoing but in order to keep creditors appraised of progress and to solicit feedback on the strategy being developed, the Joint Administrators presented to the industry bodies.

The presentation introduced and described the strategies being developed, including a general framework of the contractual solution arrangement, and explained the current status of the Jurisdiction Appeal and the Scheme.  

There was a great interest in the presentation.  The questions that were asked at the meetings are in the process of being summarised, along with answers, and will be posted on this website shortly.

Please click here to access a copy of the Joint Administrators' presentation to MFA and AIMA.

The presentation also provided an opportunity to update attendees on the general progress made by the Joint Administrators and to put the strategy for return of client assets into the context of the wider LBIE Administration.  A full report on the Joint Administrators' progress will be released later in October and will be available on this website at such time.

The Joint Administrators will continue to communicate with creditors through the PwC Lehman Brothers International (Europe) (in administration) website. Please continue to check the website for information on client assets and other matters relating to the administration of LBIE.

Please direct any questions you may have to our client management team at clientpositionresponses@lbia-eu.com.