PwC to appeal after court blow to Lehmans scheme

Insolvency experts from PricewaterhouseCoopers will challenge a ruling which dealt a severe blow to the firm’s efforts to speed up $9bn (£5.6bn) of asset returns to creditors of Lehmans.

Administrators from PwC will appeal the High Court decision after warning it will take ‘some years’ to distribute the assets without the scheme of arrangement, which pools creditors with similar claims, in place.

Steve Pearson, the joint administrator spearheading the efforts, said that the 300-page plan had to be endorsed in some form, because the assets of up to 1,000 clients would be left in limbo if a pecking order could not be established.

‘We’re definitely going to appeal,’ said Pearson. ‘The scheme had formulas for dealing with each individual client including dispute resolution mechanisms. It would have massively accelerated the distribution to the 700-1,000 clients affected.’

Pearson said of PwC’s costs to date for the Lehmans’ job ­ which he described as the ‘most complex insolvency the world has ever seen’ ­ that at least a third relate to work related to clients and client assets.

‘There are all sorts of financial nasties involved. The scheme covered every dimension of a client’s relationship with us. Valuations can be enormous. Every client relationship is different. Some will fight tooth and nail to challenge valuations, some will get fatigued and look to settle.’

The High Court said it could not sanction a scheme which affected creditors property asset rights under Part 26 of Companies Act regulations, posing a substantial setback to the firm’s efforts. Pearson said 80% of the affected clients were hedge funds and these institutions had given their assent to the arrangement. ‘We had universal recognition that this was the right thing to do. We’re enormously disappointed, but we’re confident of finding a solution.’

Chris Laughton, an insolvency partner at Mercer &Hole and council member of continental insolvency body Insol Europe, said: ‘To have sought court sanction with the support of the creditors committee does seem to have been the right thing to do at the time.

‘If the decision were to be appealed, the appeal would be pursued on the same basis of positive legal advice, the administrators’ belief they were right, and creditor support in the form of the committee.’