Client Assets Update - Bar Date Application - 27 November 2009 Updated 11/12/09

11/12/09 Updated: Please note that the public hearing of the Application described below is now scheduled to take place at 10.30am on Monday, 14 December 2009, in Court 59 of the Royal Courts of Justice, Strand, London.

This update concerns the Joint Administrators' application (the "Application") made to the High Court, regarding certain assets held on trust by LBIE. A copy of the Application notice ("Application Notice") filed at Court can be accessed here.

The Application relates to "Trust Assets" (as defined in the Application Notice) which, in broad terms, consist of securities, and money derived from securities post-administration, held by or on behalf of LBIE in segregated client accounts. Trust Assets does not include money received pre-administration, or securities or money held in LBIE's house accounts. Trust Assets do not form part of LBIE's general estate.

The Application seeks liberty, after 26 February 2010 (the "Bar Date"), to distribute Trust Assets to clients and counterparties of LBIE on the basis of the information available to the Administrators as at the date of such distribution. It also seeks liberty, after the Bar Date, to make appropriations to LBIE of Trust Assets (in accordance with LBIE's rights), on the basis of the information available to the Administrators as at the date of such appropriations. Along with the Claims Resolution Agreement, referred to in the Client Asset Update posted on 24 November 2009, the Application forms part of the Joint Administrators' overall strategy for the return of Trust Assets to LBIE's clients and counterparties.

The proposal to make this Application has previously been addressed in the 5 October 2009 Client Asset Update regarding the strategy for return of client assets.  You will note that the Bar Date has now been extended from that date originally proposed in such Update.

As  described further in the witness statement filed in support of the Application, the Joint Administrators' purpose in making the Application is to establish a basis upon which they can proceed to distribute Trust Assets. Having taken extensive steps during the course of the administration so far to identify those entitled to Trust Assets, the Joint Administrators seek to obtain certainty as to the population of claimants to whom such assets are to be distributed.

If the Application is successful, the Joint Administrators aim to achieve that certainty by requesting that clients and counterparties submit full details of any claims (other than "Security Claims", as defined in the Application Notice) they wish to assert to Trust Assets held by or on behalf of LBIE by 5pm on the Bar Date .  If an Order is made in the terms sought, persons who fail to submit claims to Trust Assets by the Bar Date may lose their ability to share in any distributions of relevant assets.

Should the Court grant the order sought, it will not require clients or counterparties to take any action in relation to the following claims:

(a)       general, unsecured claims against the estate (i.e. unsecured monetary claims against LBIE where the money is not held on trust);

(b)       claims arising only from security interests in Trust Assets; and

(c)        claims to monies held by LBIE under the client money rules set out in the FSA's Client Assets sourcebook.

As explained in the witness statement referred to above, the imposition of a Bar Date will not, of itself, resolve all of the issues faced by the Joint Administrators in attempting to make distributions and appropriations of Trust Assets. Among other things, it is possible that affiliates of LBIE may have security interests (or similar rights) over Trust Assets, which prevent LBIE from making distributions until the validity and extent of such interests in relevant Trust Assets is agreed or determined. For the avoidance of doubt, the order sought does not give LBIE liberty to distribute Trust Assets where those assets are subject to a security interest in favour of an affiliate of LBIE or other third party. The intention that such interests should not be affected by the Application is reflected in both the witness statement referred to above and in the terms of the relief set out in the Application Notice. The Administrators have approached key affiliates with a view to engaging in active dialogue as to the appropriate manner in which to resolve such issues.

This update only summarises the terms of the order sought. Clients and counterparties who believe that they might be affected should review the detailed terms of the Application Notice, including the schedules thereto.

A public hearing of the Application is due to take place at the Royal Courts of Justice, Strand, London during the week commencing 14 December. We shall provide a further update once the date of the hearing is confirmed.  Any person with an interest in the subject matter may attend and, if they so wish make representations. No respondents have been served with the Application and, therefore, as matters currently stand, no person other than the Joint Administrators is scheduled to make representations at the hearing. If you do intend to make any representations, the Administrators would be grateful it if you would provide them with advance notice of your intention to do so by contacting rory.conway@linklaters.com.

General queries in relation to the proposed Bar Date should be directed to generalqueries@lbia-eu.com. The Administrators will continue to communicate with you through this website regarding their progress in seeking to facilitate the return of Trust Assets.  Please continue to check the website for information on this and other matters relating to the administration of LBIE.