Barings audit settlement faces hurdles

Barings audit settlement faces hurdles

Failure of Barings' creditors to reach a majority agreement could undo the settlement deal reached between its liquidators and Coopers & Lybrand, the collapsed bank's main auditor, it emerged this week.

The last-ditch out-of-court deal brokered by lawyers last week for liquidators at KPMG and Coopers, now PricewaterhouseCoopers, must overcome several potential obstacles before it is finalised.

Richard Heis, liquidator at KPMG, told Accountancy Age this week: ‘There are two hurdles. Every class of creditor, secured or subordinate, needs to agree the scheme.’

For the deal to go ahead 75% of creditors with the biggest stake, and 50% of the number of creditors must give their agreement.

If either 1986 noteholders or holders of the perpetual notes, both major groups of creditors, are unhappy with the deal and succeed in getting the other smaller groups of creditors on side the deal could be thrown out.

The value of the latest proposed deal has not yet been disclosed.

It is understood the last deal brokered in June failed due to demands by the 1986 noteholders – in this case, vulture funds – for a higher settlement figure.Another key issue is when the case against Deloitte & Touche, co-auditor of Barings’ Singapore subsidiary, would begin.

The case against Deloittes will not be able to begin until the settlement deal is sanctioned by the High Court, and that could take up to eight weeks. This also means that the case would not continue until early next year.

A statement made on behalf of Rick Murray, legal adviser to Deloitte & Touche Singapore said: ‘There is more confusion and mystery than information about the proposed ‘settlement’.

‘The confusions include the apparent inconsistency of an agreement, said to be unconditional, but also described by the liquidators as “without prejudice”.

‘The mysteries include why the settlement document, said to be hundreds of pages long that will require Chancery Court approval,should be kept secret from the High Court Judge and Deloittes. We are pleased that the Court has ordered these issues to be addressed as part of the next order of business in the case.’

Another possible hurdle is whether the creditors wish to continue funding a case which has already exceeded Pounds 100m in legal fees.

More details will emerge following a case management conference due to start on Monday, 22 October.

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