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LONDON, May 17 (IFR) - Claimants against Lehman Brothers’ main European arm will receive at least £5bn on top of the original £11.5bn amount awarded after the UK’s most senior court ruled they should receive statutory interest that has built up over the last eight years.
PwC, the administrator of Lehman Brothers International (Europe), has already paid out 100% of these claims but had sought direction from the courts on where the extra money that has built up should be paid.
Junior creditors of the entity, which was put into administration when its US parent filed for bankruptcy protection in the US under Chapter 11 in September 2008, had said they should receive the additional monies rather than it going to pay interest and compensation to general claimants.
This group, which includes Elliott Management and King Street, holds LBIE’s US$2.225bn of subordinated notes.
In a unanimous judgement handed down on Wednesday morning the Supreme Court decided that the general claimants should receive statutory interest at the rate of 8% before the junior creditors receive any monies. That amounts to around £5bn.
However, the judges led by the court’s president Lord Neuberger decided by four to one to dismiss the claim to be compensated for losses incurred from swapping their dollar claims into sterling.
The claims, originally in US dollars, had to be converted to sterling on the date of LBIE’s administration in September 2008 to be “proved” under English law. Since then sterling has weakened significantly, particularly after the UK voted to leave the European Union last June.
The FX compensation, estimated at £2bn, would have been enough to account for most of the surplus, leaving other creditors with little.
There are still a number of other outstanding issues on more detailed points to be decided in lower courts.
These uncertainties could delay any eventual payouts, possibly until 2021, unless the parties settle beforehand.
The case was heard last October but judgement had been delayed in part because all 11 judges at the Supreme Court had been involved in the ruling that triggering article 50 of the Lisbon Treaty to start the two-year Brexit process required parliamentary approval. (Writing by Chris Spink)