CRC Credit Fund Ltd., Lehman Brothers Inc. and Lehman Brothers Finance AG can have access to billions of dollars deposited with Lehman Brothers Holdings Inc.’s U.K. unit that wasn’t protected in separate accounts, a London appeals court ruled on Aug. 2.
CRC and the Lehman affiliates appealed a December ruling that Lehman Brothers International Europe clients whose money wasn’t properly separated into “client money” accounts when the bank collapsed in 2008 would be treated as unsecured creditors in the U.K. insolvency case, likely giving them only a fraction of what they are owed.
LBIE’s insolvency administrator, PricewaterhouseCoopers LLP, will have to identify all client money which wasn’t properly segregated from the bank’s other funds and pool it with the accounts that were kept separate, according to the judgment. Clients whose money wasn’t kept separate will be able to claim from the expanded pool. The case was brought by PwC, which asked for the court’s direction on how to deal with the claims.
The decision is “a boost for investor protection,” said CRC’s lawyer, Robert Turner at Simmons & Simmons in London.
“It means that the U.K. client-money rules in fact work better than people thought following last year’s judgment,” Turner said. “That judgment said if you put your money with a prime broker who failed to do what it said it should do under the rules, your client money protection fell away. The court of appeal has now said that’s not right, the protection applies even if the firm hasn’t done what it should have.”
The December judgment criticized LBIE’s failure to segregate client money and the U.K. Financial Services Authority for not sufficiently overseeing the accounts.
The affiliates of New York-based Lehman have made claims seeking more than $3 billion from LBIE, according to the December judgment. CRC, a fund of New York and London-based Christofferson Robb & Co., is seeking $76 million that should have been put in separate accounts. LBIE held $2.16 billion in segregated accounts when it went into administration in September 2008.
Oaktree Agrees to Dubai-Led Debt Restructuring Plan for Almatis
Oaktree Capital Management LLC has agreed to support Dubai International Capital LLC’s plans to restructure the debt of German alumina-products maker Almatis.
Oaktree, the largest lender to Almatis with 46 percent of the company’s senior debt, had vied for control of Almatis since its $40 million default last year. Los Angeles-based Oaktree will drop efforts to take over Almatis after its competing debt proposal was rejected, two people familiar with the matter said yesterday.
Almatis said the U.S. bankruptcy court has granted it permission to prepay senior lenders in full and enhance recoveries for junior lenders, according to a statement. Under the plan, Dubai International, the emirate’s investment fund, will inject $100 million of equity into Almatis.
The agreement ends the “uncertainty that the business and its stakeholders have faced over the past 18 months,” Dubai International Chief Executive Officer Anand Krishnan said in an e-mailed statement. “All stakeholders now support a smooth refinancing process.”
Dubai will prepay senior lenders with about $600 million of new debt financing to be provided by JPMorgan Chase & Co., Bank of America Merrill Lynch, Blackstone Group LP’s unit GSO Capital Partners LP, GoldenTree Asset Management LLC and Sankaty Advisors LLC.
Dubai International paid about $1.2 billion for Almatis in 2007, using $970 million of loans underwritten by banks including UBS AG and Bahrain-based Arab Banking Corp., Bloomberg data show.
The U.S. bankruptcy court has scheduled a hearing to consider a settlement agreement between Almatis and Oaktree on Aug. 23.
Latvia’s Bankruptcy Legislation Signed Into Law by President
A Latvian personal bankruptcy law that will require lenders to forgive debt for private borrowers declared bankrupt after a maximum of three and half years, was signed into law by President Valdis Zatlers.
The president decided to sign the law, which was passed by parliament on July 26, according to an e-mailed statement today. Zatlers had returned the law to parliament on June 22.
Loans late by more than 90 days in Latvia reached 19 percent of the total in May, according to the country’s banking regulator. Borrowers have struggled to service their debt after a real estate-fueled economic boom turned to bust and the country’s economy contracted 18 percent last year.
“The final variation is always a compromise and one of the reasons the law was sent back for a second review was that such a compromise between borrowers and lenders did not exist,” said Zatlers today, according to a second statement.
Latvia’s banking industry is dominated by Nordic lenders led by Swedbank AB, SEB AB, Nordea AB and DnB Nord AS, which accounted for about 64 percent of total lending in the first quarter, the Association of Latvian Commercial Banks says.
“We do not expect the law to have any significant impact on the Nordic banks” because they have already taken large provisions in the Baltics, Maths Liljedahl and Pawel Wyszynski, Sweden-based analysts at Nordea, said in an e-mailed note on July 27. “Also, the banks themselves have taken part in establishing new rules.”
The law allows borrowers declared bankrupt to write off their debt after two years if they repay 35 percent of what they owe. A debtor who can repay 50 percent of what he owes is entitled to have his debt written off after one year.
One.Tel May Pursue Claim Against CGU, Australian High Court Says
One.Tel Ltd., the bankrupt Australian phone company, may pursue a claim against CGU Insurance Ltd. for A$20 million ($18.3 million) that a former director was ordered to pay, the country’s top court ruled.
The High Court of Australia today partly overturned an appeals court ruling, which said a bankruptcy trustee’s time limit to pursue the claim had expired.
“The effect of these arguments, if sound, would have been to give CGU an adventitious windfall,” the five-member court wrote in today’s judgment.
One.Tel collapsed in 2001 owing more than A$1 billion after the board canceled a A$132 million stock offer to shareholders. Publishing & Broadcasting Ltd., which had been controlled by Kerry Packer, then Australia’s richest man, and Rupert Murdoch’s News Corp. were the biggest shareholders in the company and lost a combined A$1 billion on their investment.
The High Court ruling didn’t deal with the merits of the case and CGU maintains the directors’ policy wasn’t valid, Iwona Polski, a spokeswoman at the insurer, said in a phone interview. One.Tel failed to meet disclosure requirements, which invalidated the policy, she said.
Wind Hellas Says Greek Phone Operator Draws Investor Offers
Wind Hellas Telecommunications SA said it received offers from a “number of potential investors” for the Greek phone company, which put itself up for sale after delaying payments on 1.8 billion euros ($2.4 billion) of debt.
Buyers have until Sept. 15 to make a binding offer for the company, Wind Hellas said in a statement on Aug. 2. It didn’t provide the bidders’ identities.
Egyptian billionaire Naguib Sawiris, who owns Greece’s third-largest mobile phone operator through Weather Investments SpA, said he hasn’t made a decision about whether to invest more funds.
“We are considering it but there’s no decision as yet,” Sawiris said in an interview. “It will depend on discussions with creditors.”
The company is also exploring a share sale, an investment with a debt restructuring, or a combination, according to the statement.
Wind Hellas, hurt by falling consumer confidence and spending after the implementation of austerity measures to ease the Greek budget deficit crisis, is seeking a seller and an agreement to write off some of its debt less than a year after emerging from bankruptcy.
Creditors to the firm agreed to freeze payments until Nov. 5 while it tries to sell itself, Wind Hellas said last month. The company deferred a 17.5 million-euro interest payment on its 250 million-euro revolving credit facility. It also missed a 23 million-euro coupon payment on 1.2 billion-euros of floating rate notes due July 15.