Administrators could pay back Lehman creditors by 2011

PwC administrators to Lehman Brothers International Europe (LBIE) could repay creditors as early as next year if creditors are willing to accept lower valuations.

The latest announcement by the administrators is part of the "consensual approach" proposal which will also determine the value owed to creditors and how the estimated $22bn (£14.8bn) of assets at LBIE will be divided.

The consensual approach could enable joint administrators to agree the majority of value to unsecured creditor claims by the end of the year and distribute the first payments in 2011.

According to Steve Pearson, joint administrator and partner at PwC, the conventional process could rack up costs and take years before any payments are made.

Currently there are an estimated 6,500 creditors and assessing each claim could take until 2013.

Pearson said: “The consensual approach is an innovative mechanism which will enable the claims to be determined in an expeditious manner, resulting in significant time and cost savings to both unsecured creditors and LBIE.

"Further, the timing at which cash distributions can be made will be accelerated materially.”

Administrators are currently speaking with creditors including the creditor committee, as they need an "overwhelming majority" creditor backing for the consensual approach to go ahead.

If the administrators receive the backing needed to approve the proposal they hope it can be launched in autumn this year.

Tony Lomas, Steven Pearson, Dan Schwarzmann, Mike Jervis and Derek Howell, were appointed joint administrators to LBIE on 15 September 2008.

Earlier this week the Accounting & Actuarial Discipline Board said it would investigate the conduct of Ernst & Young members in the audit of Lehman Brothers UK arm LBIE, with the Big Four firm saying it would cooperate fully.

Further reading:

Watchdog opens investigation of E&Y over Lehman

Lehman Brothers to sue JPMorgan Chase

Lehman investigation blocked by US-EU regulator stand-off