Alix Partners. A ray of hope?

  • jkk
  • 10/10/08 31/05/09
  • a depositor
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Posted: Thu, 08/01/2009 - 11:38

Below is an e-mail I sent to the Managing Director of Alix Partners, Mr. David Lovett, and his reply received late in the evening of the very same day.

Maybe I am too much of an optimist but I find his message rather reassuring. For the first time since the beginning of this nightmare I have an impression that our fate is in good professional hands.

From: XXXX XXXX
Sent: 05 January 2009 11:48
To: Lovett, David
Cc: Hon. Tony Brown - Chief Minister; Hon. Allan Bell - Treasury Minister; Isle of Man Government - Treasury Department; Financial Supervision Commission; House of Keys
Subject: Alternative to Liquidation of KSF IoM

Dear Sir,

I am a depositor in Kaupthing Singer & Friedlander IoM (presently in provisional liquidation). As I learned from various press publications your practice has been selected by the Isle of Man Government to develop alternatives to a traditional winding up of the bank.

While studying various solutions proposed by depositors and other participants of the liquidation process I noticed that one very simple option has never received any serious consideration. It is the reactivation of the bank as an IoM Government property.

If we look at the numbers involved, there seems to be absolutely no reason to liquidate the bank at this particular moment. The assets (approximately £1070m) exceed the liabilities (£840m) by a comfortable margin of 27%. The cash reserves (£105m) represent 12.5% of the total value of liabilities, which again exceeds the normally required minimum of 8% by a wide margin.

The only stumbling block on the way to bank's reactivation is the large cash deposit of £555 million presently frozen in KSFUK. But that needs not to be a problem if the frozen liquidity is used to buy part of KSFUK's loan book. This way the liquidators of KSFUK could receive full book value for the loans which otherwise they might have to liquidate at a discount. KSFIoM on the other hand would build up the value of its loan book to almost £1 billion, which would allow it to be a profitable bank, capable of paying competitive rates on deposits. If the bank is officially taken over by the IoM Government, there is no danger of a run on its assets and its banking licence could be reinstated almost immediately.

This of course is only a sketch of a possible solution, but I think it has a potential to become the best possible option if developed by a creative professional team of experts. The most important aspect of this proposal is that it benefits all participants of the process. The depositors recover all their monies with interest, the Government and banks operating on the IoM save themselves hundreds of millions of pounds in contributions to Depositors Compensation Scheme, and the banking industry, the main employer on the Island, is saved from collapse which may follow if KSFIoM is allowed to fail.

Hoping this may help in your uneasy task of saving the bank, I remain

Yours faithfully,

XXXX XXXX
Depositor in Kaupthing Singer & Friedlander (IoM)


Date: Mon, 05 Jan 2009 09:42:42 PM CAT
From: "Lovett, David"
To: XXXX XXXX
Cc: "Dubey, Shagun"
Subject: RE: Alternative to Liquidation of KSF IoM

Thank you Mr XXXX, for your thoughtful contribution which we will examine against the other options being examined at the current time.

I totally share your wish to find the best way to mitigate all downside from the current process…..

Best regards,

David Lovett
Managing Director

AlixPartners Ltd
Tel: + 44 20 7098 7416 | Mob: + 44 7785 293 752 | dlovett(?)alixpartners [dot] com

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False Hope

  • calpespain
  • 12/10/08 n/a (free)
  • a depositor
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  • Fri, 09/01/2009 - 00:37

JKK,

I know we are all clinging onto hopes here but, why are you assuming that this short note, is anything other than a polite reply. Considering that they are being paid by the IOM government then they would be saying this type of comment. From within those words I can see no light, not even a glimmer. If we get 60% out of this over the next 7 years returned from the LP that will equate to about 45% if we had it now, so nothing spectacular is going to emerge out of this. This engagement of Alix Partners by the IOM government is probably an elaborate smoke screen to try and save face. Looks likely that we will not even receive any payments for at least a year from reading all of the available data. Am I hopeful, no, not at all. We should force the payment of the DCS and take that money now and any further money recovered on top of that amount can be retuned to us over the next 7 or so years. Or we are just going to be sitting here next year this time, still hoping for hope. Its lost, a total return of our money is our of the question and its time to get what we can, now.


False Gloom and Doom

  • jkk
  • 10/10/08 31/05/09
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  • Fri, 09/01/2009 - 20:04

Calpespain,

Why do you waste your own energy and time on driving yourself into depression? There are participants of this forum that will gladly do it for you, free of charge!

Why do I see a glimmer of hope in David Lovett's reply? For quite a number of reasons. Do a close reading of his note:

  • he was in no way obligated to react to my unsolicited e-mail and yet he took the time and did it, which tells me he is a decent human being;

  • he replied personally although he could have asked a junior trainee to send me a standard thank you note;

  • he responded to my letter the same day I sent it, which would suggest that he attached some importance to it;

  • he wrote his note late in the evening, well after regular business hours, which means he is a hard working conscientious professional;

  • he called my proposal "thoughtful", which means he actually read it ;-)

  • he forwarded a cc to a colleague in his firm, which would suggest that they really intend to devote some attention to what I wrote;

  • he mentioned that they would examine my proposal against other options they are analysing at the moment, which means that actually there are other options which are being investigated by them; if any of those option is better then mine, I will take it any time.

I certainly do not want to read too much into that short note, but I am confident now that we will see something interesting coming from Alix Partners on 15 January.


False hope reply

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Fri, 09/01/2009 - 10:40

calpespain

I am not here to defend anyone and I cannot give anyone hope of any specific return until we see facts on Court documents. However I think your 60% return over 7 years maybe wide of the mark. The asset position with London might be better than hoped (i.e. the deficit is not £550m but substantially less) and therefore the returns over just 2 or 3 years could be higher than 60%.

I cannot say my figures will be correct, lets wait and see what gets put in front of the Court on 15th but neither can you say that 60% over 7 years is the figure that will be received.


Reply to false hope

  • SBS
  • 28/10/08 31/05/09
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  • Fri, 09/01/2009 - 10:15

I entirely agree with your comments. It is now clear that the DCS is an "Emperor with no clothes" and of no practical use to any of us.

Why honesty from the IOM government on this matter could not have been the order of the day from October last year, instead of pretending otherwise does little to enhance the reputation of the island as a financial centre.

SBS


reply to false hope

  • Anonymous
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  • Fri, 09/01/2009 - 00:49

How refreshing to encounter another realist in the forum.


That's two of you then!!!

  • kandk
  • 02/11/08 31/05/09
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  • Fri, 09/01/2009 - 17:05

That's two of you then!!!


@kandk: possibly three, possibly 700.

  • follow_the_tao
  • 11/10/08 31/05/09
  • a depositor
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  • Tue, 12/05/2009 - 03:24

Collectively, and the research shows that the collective opinion is on average more correct, the SoA is sinking.

To date there are a greater quantity of votes against the SoA than many, even ourselves, might have feared/hoped for.

For those that haven't voted, please do so. For those that have, possibly we might have won. Who knows?

What's right is right.


That's two of you then

  • Anonymous
  • Offline
  • Fri, 09/01/2009 - 17:09

There are a lot more than that. For public comments, see here:

http://chat.ksfiomdepositors.org/group-topic/50k-group-next-steps#comments


Access denied

  • Sophie
  • 16/10/08 31/05/09
  • a depositor
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  • Fri, 09/01/2009 - 17:12

http://chat.ksfiomdepositors.org/group-topic/50k-group-next-steps#comments

That states 'Access denied. You are not authorised ---'. Why is that?


access denied

  • Tricky Dicky
  • 24/10/08 30/05/09
  • a depositor
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  • Fri, 09/01/2009 - 17:21

You will be denied access as you are probably not a member of that particular group, the same would apply to such a young lady as yourself, if you attempted to enter the 'pensioner' group. However you can join the <50k group if you wish or even the pensioners group. Go to Groups at the top of the page scroll down to find less than 50k group and 'join'


Tricky Dicky

  • Sophie
  • 16/10/08 31/05/09
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  • Fri, 09/01/2009 - 17:25

Thanks for that, will do


False hope

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Fri, 09/01/2009 - 13:23

Elgee, you say that the DCS is ineffective. You have said that you wonder whether the banks will actually contribute and how it will pay out.
You have stated that the SoA for your support should - based upon a literal interpretation and on the basis that the banks contributed as requriered by the document - should pay out <50K no more slowly than the DCS if it is followed per the plan.

Don't you think that it would be more realistic to adopt a practical and considered view as to which of the options would be best when the information is available?

You make all these comments but don't suggest a workable alternative, and criticise the work of others.

By all means open the debate, but I don't really understand your arguments.


Manx further reply

  • Anonymous
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  • Fri, 09/01/2009 - 14:33

I recall that my alternative proposal (SoA accomodating the requirements of sub-50k depositors) was referred to again in my posting late last night:

http://chat.ksfiomdepositors.org/group-topic/50k-group-next-steps#commen...


Manx-person reply

  • Anonymous
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  • Fri, 09/01/2009 - 14:10

I can see now why you wrongly beleieve that I have said the DSC is ineffective. My reply to Calespain (which appears on the forum in triplicate) has in one instance shifted in position so that it appears to be a reply to another poster who thinks that the DCS is ineffective.

However, my reply was in fact the observation that Calespain's comments (above) indicated that he was a realist.


manx-reply

  • Anonymous
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  • Fri, 09/01/2009 - 13:55

To be clear, I do not say that the DCS is ineffective. I say that the IOM government does not want to trigger it because they do not want banks to drop out of the IOM or for the scheme otherwise to be shown up as defective, but I do not say it is ineffective. There is a big difference between ineffective and defective, partcularly as the defects in question lie in the implementation of the scheme by the IOM government rather than in the regulations themselves (the statute which gives effect to the scheme). On the contrary, those regulations would be effective and the DCS can be enforced through the Manx courts if the IOM FSC does not properly put them into effect.

As for alternative proposals, I keep making one but apparently it is being ignored. I will make it again later today (when I have more time), but it lacks input data which I am unable to get (and seemingly the committee has also been unable to get). I am sure you know what that input data is but I can spell it out for you if you do not.


DCS/ S0A

  • Anonymous
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  • Sat, 10/01/2009 - 22:42

For the benefit of manx-person, who said above that he was unaware of any alternative proposal I have made, I quote below one of my several postings on this same subject, dated 6 Jan 2009. The link to the posting doesn't work, but it appears under "Diver's comments ..sub-50k" thread.


elgee
Joined: 10/10/08
Online Now
Posted: Tue, 06/01/2009 - 19:36 I have posted elsewhere a few days ago:

There should be no expectation that those depositors who would have been fully compensated under the DCS should be paid less or over a longer period of time so that larger-value depositors might receive larger payments than they might otherwise receive through a combination of the DCS and winding up . Any sacrifices made so that larger value depositors might receive more money should be made by the larger-value depositors themselves, not by those who have a legitimate expectation of being fully compensated under the DCS.

The principle is, I believe, correct and entirely equitable. Insofar as any of the hypothetical scenarios discussed above are realistic (and I do not believe they are), those depositors who would (or think they would) stand to gain in the long term by having their payouts delayed could and presumably would agree to them being delayed and those who do not stand to gain should not. The two are not mutually exclusive and within a single scheme those depositors who expect to gain by doing so would suffer a short-term disbenefit while those who would not gain as a result of the scheme (those who would otherwise have been fully compensated under the DCS) do not suffer any disbenefit under the scheme. It would mean, however, that higher-value depositors suffer a larger disbenefit in the expectation of their long-term gain than they would do if they were able to persuade lower-value depositors to share in making the sacrifice for no gain for themselves.

Both German Mike and I have pointed out elsewhere that our duty is to our families. Do you think that we should agree on their behalf to deprive them so that higher-value depositors might recover more? However, refusing to do so would not scupper things or otherwise spoil the chances of a larger recovery for higher-value depositors, it just means that they (the higher-value depositors) would have their payouts further reduced in the short term so as to improve their chances of getting more in the longer term.



DCS/SoA

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 09/01/2009 - 14:18

The IOMG would clearly prefer a 100% return to all investors; as would the depositors.

The defective/ineffective argument illustrates my point really. What depositors want it as much of there money back as possible, and those under 50K want all of it.

It is easy [hard] to play a mental chess game with what will happen, but to mind mind a SoA will probably provide a more certain/defined/predictable outcome then the DCS triggering.

It is hard to assess the alternatives when they haven't been presented.

If something is ineffective or defective then it still doesn't work ;-) You can take steps to fix it, but it amounts to the same thing.

"...it lacks input data which I am unable to get (and seemingly the committee has also been unable to get). I am sure you know what that input data is but I can spell it out for you if you do not."

Why didnt you say something like "without the breakdown of accounts by amount, making this proposal is difficult" or some such thing.

If you weren't so contentious with your points (i.e. your comment above being seemingly condescending then I think that you may get more air time.

The treasury proposals should be submitted within a week and hoepfully will be posted on here for everyone to look at and people will then be able to form a better view I hope.


DCS/SoA

  • Anonymous
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  • Fri, 09/01/2009 - 14:27

Even when the details are posted, it cannot be compared properly with the DCS without the necessary data.

However, leaving aside my point about data, at present there is only one scheme on the table, and that is the DCS and winding-up. It appears, however, that you have already made the decision that the alternative would be better without even knowing what the alternative(s) is (are).


DCS/SoA

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Fri, 09/01/2009 - 14:38

I said that a SoA would probably provide a more defined or certain outcome. This is because of the nature of a SoA.

The process of a winding up/DCS is more uncertain in terms of timings and recovery.

That was my point.

I agree there is only one scheme on the table at the moment, but the primary stated purpose of the adjournment was for Alix to explore other options.

The affidavit in support of this should be submitted to notice parties within a week and hopefully will be available for members of this site to debate.

Creditors of the bank can then make there own minds up I guess.


manx-person

  • Anonymous
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  • Fri, 09/01/2009 - 15:36

I do not understand your comments. Both the return under DCS + liquidation and and under an SoA are subject to exactly the same uncertainties, namely how much of the bank's assets can be recovered and by when, principally from the UK.


DCS/SoA

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 09/01/2009 - 15:47

Well we will need to see what happens I guess. In my experience SoAs provide a more certain outcome than merely waiting for liquidation processes bureaucracies and costs.

We will of course have to wait and see what transpires.

Please don't use my name in the post subjects! this isnt a personal conversation conducted over a forum, I am trying to add my comments to a group discussion.


SOA

  • tsunamivictim
  • 11/10/08 n/a (free)
  • a depositor
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  • Fri, 09/01/2009 - 16:16

Please can someone tell me what is an SoA?


SoA

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Fri, 09/01/2009 - 16:53

To clarify Elgee's comment - A vote of the creditors (depositors) will almost certainly be required to accept a SoA so accordingly the informal commitee are not in fact 'ratifying' anything, they are consulting with the Treasury.

Any ratification/adoption of the plan will more than likely be made by a formal voting mechanism, perhaps under the supervision of the court


SoA

  • Anonymous
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  • Fri, 09/01/2009 - 17:10

If the court can be persuaded that it is a viable scheme likely to be of benefit to depositors then I agree that it will then be likely to require a vote. Is not the purpose of the commitee, from the Treasury's point of view, so as to assist it in persuading the court that it is viable? If not, what is their purpose - the consulting has already been done with Alix and the proposal for the scheme already set out.


SoA

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Fri, 09/01/2009 - 17:20

The IOMG consult on all sorts of things before they are implemented, to see what the vies of affected parties are.

Its just one of the functions of Government.

There is a IOMG code of conduct on consulatation; I agree that the court will be intersted to hear what consultation has taken place prior to he issue of the proposal, but whether it gets implemented will depend on the level of creditor support


SOA

  • Anonymous
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  • Fri, 09/01/2009 - 16:22

Scheme of Arrangement for creditors.

It is what the informal committee are being/will be asked to ratify/comment upon on our behalf.

However, the vast majority of depositors are sub-50k, and the proposed scheme could not possibly give them more than they should get under a proper operation of the DCS, which is 100% (broadly speaking, there are some exceptions).


DCS/SoA

  • Anonymous
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  • Fri, 09/01/2009 - 16:17

We don't really, do we?

I believe that the projections in respect of the proposed SoA are now available and may well be known to you. Even if they're not, I expect you know that they too incorporate the same uncertainty as to expected return from the London liquidation.


DCS/SoA

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 09/01/2009 - 16:48

I have no knowledge of any of the details of the SoA that will be proposed.

When the documents are available I guess it will be fair to comment.

There is more scope for more commercial arrangements to be incorporated into a Scheme of Arrangement than a traditional liquidation. We shall see if there are any in due course.

There should be 2 weeks between the publication of the proposed SoA and the 29th so there should be plenty of opportunity for considered analysis rather than hypothesis.


reply to false hope

  • Anonymous
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  • Fri, 09/01/2009 - 00:49

How refreshing to encounter another realist in the forum.


reply to false hope

  • Anonymous
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  • Fri, 09/01/2009 - 00:49

How refreshing to encounter another realist in the forum.


triplicate

  • Anonymous
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  • Fri, 09/01/2009 - 00:50

I am not quite sure why the above posting came out in triplicate and apologise to the forum for not being able to delete the additional two copies.


Bloomberg in IOM today

  • Flower
  • 18/10/08 31/05/09
  • a depositor
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  • Thu, 08/01/2009 - 17:41

We were in touch with Bloomberg Newsdesk in the early hours after the whole KSF IOM drama first unfolded & when we, as expats living abroad, could get absolutely no news on what was happening - they were decent and gave us a lifeline when we felt so dreadfully alone!. A Newsdesk reporter, Simon Clark, has contacted us again to advise that he's in IOM today & tomorrow to interview Alan Bell. Will keep this site informed when the article is published.


about simon clark..

  • hippychickrobbed
  • 03/11/08 31/05/09
  • a depositor
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  • Thu, 08/01/2009 - 17:51

so there is going to be a report on this, ofcourse madoff brown,. I mean they have got our money havent they? whats the difference. maybe they can get hold of diver and his team , have you got a contact number?


The matter is in hand

  • expat
  • 10/10/08 31/05/09
  • unspecified
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  • Thu, 08/01/2009 - 18:13

The matter is in hand everyone so please you don't have to worry about it and pester the journo. He has being spoken to and I am told will be again. Thanks for the alert.


Simon Clark's tel nbr

  • Flower
  • 18/10/08 31/05/09
  • a depositor
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  • Thu, 08/01/2009 - 18:00

+44 20 7673 2059. Sorry, don't have his mobile nbr. Perhaps the London office can give it.


Rays of hope?

  • Hoping and coping
  • 16/10/08 31/07/10
  • a depositor
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  • Thu, 08/01/2009 - 13:14

Thank you jkk for your positive and optimistic contribution. It is a useful reminder that there are people in the Isle of Man working hard to sort out this massive problem.

I posted two News Items from the IOM earlier today (see below) - they too seem to indicate that things are going on, people are doing things, working on this, there:

Minister holds Kaupthing talks in Iceland
http://www.manxradio.com/readNEwsItem.aspx?id=30642

The treasury minister has returned from Iceland, where a Manx government delegation met with officials to discuss Kaupthing Singer and Friedlander.

Although unwilling to go into great detail about what was discussed, Allan Bell (pictured) says the talks were very useful.

He says the two countries are united on a number of issues and told Manx Radio:

"I think we both have a great deal in common, (and) we both feel aggrieved about the situation that has arisen.

"We both believe the situation has been brought about by the actions of the UK authorities.

"I think, without going into great detail at this stage, they are not anticipating a quick fix towards resolving the Kaupthing issue, certainly in relation to the Icelandic interest.

"But they are clearly working on a number of fronts to try and get a better understanding of what the way ahead might be."

Kaupthing to sue UK
http://www.manxradio.com/readNEwsItem.aspx?id=30648

The Icelandic government says it won’t now be suing Britain over the freezing of Landsbanki’s assets – but it will fund a legal challenge from Kaupthing.

Iceland was going to take the United Kingdom to court over the Treasury’s use of anti-terror legislation to freeze assets, but says it will fund legal action over the UK’s decision to put Kaupthing Singer & Friedlander into administration last October.

A US law firm plans to mount a judicial review of the KSF decision, which Iceland claims sparked the collapse of Kaupthing and its Manx sister company.

If successful, the challenge could see Kaupthing’s assets in the UK returned, and if that happened investors in the Douglas-based offshoot may get their savings back.


hoping and coping?

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Thu, 08/01/2009 - 14:31

I dont understand this Tony Browns trip he arrives there , it looks positive then its back to square one again. As for iceland what is it they are not sueing them now or what? neverless the last bit said it all that we wont get our deposits that way despite their guarantee. I think Iceland are a waste of time.


Rays of hope - yes, still hoping

  • Hoping and coping
  • 16/10/08 31/07/10
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  • Thu, 08/01/2009 - 14:45

It seems positive to me. The first one shows that the IOM (Allan Bell, the Treasury Minister) is talking to Iceland. The second refers to the Judicial Review, which we already know about, but I think it's positive that it is in the news. We seem to have lost sight of the fact that things are - surely - happening behind the scenes in the IOM and at KSFIOM.


Rays of Hope

  • Ashoker
  • 12/10/08 31/05/09
  • not prepared to answer
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  • Thu, 08/01/2009 - 14:09

Thank you Hoping and Coping for this very informative posting. It seems very interesting to me that the IOM Govt. has now decided to represent itself directly in international affairs, instead of relying on the UK Govt.!


please explain more

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Thu, 08/01/2009 - 11:51

please enlighten me on this last bit ,mitigate all downside from the current process?


please explain more

  • grapow
  • 20/10/08 31/05/09
  • unspecified
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  • Thu, 08/01/2009 - 12:01

My interpretation hippychick is that in this context he is saying they have a wish (almost an obligation) to minimalise losses). Certainly thats what mitigation in insurance means - I hope he is successful!


Alix Partners

  • DoctorJames
  • 19/10/08 n/a (free)
  • unspecified
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  • Thu, 08/01/2009 - 11:41

Excellent idea jkk. Well done.

Doctor James