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
‘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
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.’
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