Lehman Brothers’ Europe Administrator Has A “Plan B” For Creditors
By: Ainsley Brown
PricewaterhouseCoopers (PwC), the administrator for the European outfit of Lehman Brothers, has come up with a ‘Plan B’ to give out $17 billion to creditors. This after the High Court in England rejected a plan by PwC in August that would have freed up over $13 billion worth of assets.
The court rejected the earlier plan because it called for the splitting of over 1,000 creditors into three groups by asset class; each claim then being dealt with by class. Mr. Justice Blackburne, sitting in the High Court, ruled that he did not believe that the English courts had the authority to split the creditors into such groups; moreover, court did not have jurisdiction to bind dissenting creditors to such a plan.
PwC has appealed the ruling of Justice Blackburne with the appeal being heard in the Court Of Appeal on October 26.
The new scheme was not simply draw up in the event that the appeal fails, no; it runs parallel to it. While the new scheme closely resembles the first – it is in fact based on the old plan – “including a bar date, and deal[s] with all aspects of determining the value of a creditor’s net equity, the allocation and the distribution of trust property,” it is however, different in one significant respect. The new plan in effect draws on the objections of Justice Blackburne and presents a contractual solution where creditors who sign up would be bound to each other and Lehman Brothers Europe. Dissenting creditors would not be bound by the agreement and their rights would be protected under the normal processes of an administration. PwC also intends to seek court direction in order to assist them in the administration and distribution of creditor assets. This will become essential, especially, in the cases where there are short falls in assets to be distrusted between signatory and non-signatories to the agreement.
If the appeal in October is successful the new contractual agreement would simply be piggybacked onto the old scheme giving dissenters similar/same terms.
