Brothers in arms

7 Oct 2009 By Nicholas Paisner

The UK High Court dismissed administrator PwC’s plan to return the remainder of the failed bank s European custodial assets in August. A new proposal might allow creditors to bypass the courts. The catch: 90% of creditors have to sign on.

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PricewaterhouseCoopers (PwC), administrator of Lehman Brothers International Europe (LBIE), outlined a new plan allowing for the return of $8.9bn of remaining custodial assets on October 5.

This follows the High Court's August decision to block an earlier PwC proposal which would have allowed the administrator to begin distributing assets in the first quarter of 2010. The new plan would involve a contractual agreement between creditors and LBIE, obviating the need for court approval.

PwC's initial proposal was disallowed as the High Court did not believe it had the authority to approve a legallybinding scheme of arrangement in connection with custodial assets. 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...there is no jurisdiction to enable this to be done so as to bind dissentients.

The recovery of Lehman's custodial assets has proved more difficult in Europe than in the US, where client assets were more effectively segregated.

Context News

PricewaterhouseCoopers (PwC), administrator of Lehman Brothers International Europe (LBIE), outlined a new plan allowing for the return of $8.9bn of remaining custodial assets on October 5.

The recovery of Lehman's custodial assets has proved more difficult in Europe than in the US, where client assets were more effectively segregated.

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