Finalised thoughts on the JLs/SL's July 2015 Progress Report

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Posted: Tue, 11/08/2015 - 21:23

Hi folks,

Finalised thoughts on the JLs/SL’s ‘6 Monthly’ Progress Report (9.7.2015).

Having read the latest report (a lot shorter now) I now detail my thoughts on it below. This post contains what I think are the main points in the July 2015 Progress Report. Again I could have missed points or disregarded some points that are important to others. One or two interesting points raised by the SL re cash due back from loans, PG and end of liquidation.

I will now partially amend my June 2015 information to include info from this Report, in readiness for the SL’s September update.

Page 6/7 – Dividends & Dividend Range – It is all about interest now as we received 100% of our capital back. Based on current cash balances and hoped for future returns from the KSFIOM Loan book the SL expects to pay some interest on claims. A further £3.9 - £7m is hoped for from the £23m remaining outstanding from the loan book.

Any more returns will be by way of interest we have lost. Creditors entitled to contractual interest in excess of 5% would receive the amount due in excess of 5% up to the 8.10.2008.

Creditors not entitled to contractual interest would receive 4% on amounts owed up to 8.10.2008. This amount would be small.

Once the above two steps have been completed all creditors will have received interest entitlements up to 8.10.2008. In respect of further interest payments, SL still awaits word from the IOMC re directions on the calculation methodology – no reply back so far. Knife Edge did inform us recently that there maybe problems in some way re the Early Payments procedure applied by the IOMG and that is holding up decisions

Note, it is intended that one further dividend will be paid to creditors in respect of each class of interest. Timing and amount will depend on realisation of remaining assets. To me that means Loan Book, PG and Litigation. I thought based on the given wording that some Creditors might get two payments.

We can expect a further ‘6 monthly’ update dated 9.1.2016 (Page 6).

Returns from KSFIOM loan book are currently 93% (page 2) – estimated returns have moved up from previous 92.7% - 93.0% (by deduction) to between 93.92% - 94.61% (by deduction), (Page 7 chart). Another nice increase in both lower and upper estimated returns – great news.

The SL speaks of the 9 remaining loans (facilities) on page 12. In page 11 he also speaks of 6 ‘relationships’. Outstanding sterling equivalent capital value is £23.0m. Only one larger ‘relationship’ left totalling £14.1m

Loan book, pages 13 shows £23.0m still due. SL again showing the remaining loans in GBP, Euros, USD and Swiss Francs. No details regarding Property, Yachts, Aircraft, or which countries the loans refer to. Although the £2.5m returned in April was the complete loan against one of the yachts. In currency terms 45.65% of loans due are in Euros (£10.5m), 17.39% GBP (£4.0m), USD at £6.0m equals 26.08% and Swiss Francs £2.5m equals 10.87% of the outstanding £23.0m.

‘Write – offs’ still less than 1%. But SL must surely bring in his £3.9m to £7m asap then ‘call in’ the remainder of these loans and close the loan book off, thus causing ‘Write-offs’ to rise up to perhaps £22.5m (5.41%) thus reaching the end figure for the Liquidation.

Non Performing loans – pages 11 & 14 - All remaining loans were overdue as at end of June 2014 – which we already knew. Really not a lot of info on current state of loans not paid back. Some general info re how SL is going about things, nothing substantial – I find it again very disappointing even taking into account confidentiality. But it must be said estimated returns from the loan book keep rising – which is great.

Page 15 re Unresolved & Unclaimed. JLs now showing £2.6m Unresolved and £1.5m Unclaimed. Keep hoping JLs will finalise ‘Unresolved’ claims now, while finalising loan book and await developments on PG and any Litigation. ‘Unclaimed’ has to wait until the end of the Liquidation Process.

Page 14 – Parental Guarantee – significant change? (From data obtained within & outwith this report) – Icelandic Government has asked all parties to accept a ‘haircut’ of 39% in order for things to progress. Or the ‘Estates’ go into Bankruptcy and pay a 39% tax. But that this could lead to legal wrangling in multiple jurisdictions for a decade Sigrun Davíðsdóttir has stated in her Blog. JLs/SL do state in the report that the value of any claim (based on our dividend now being at 100%) will be small. And also once the claim has been agreed it is possible that it will be sold rather than held until the conclusion of the Icelandic Insolvency Process. I have said for quite some time now that I hoped the JLs would go down that route to hopefully end the Liquidation more quickly. Some of you do not agree with me but that is what I would like to see rather than ‘hang on’ for up to another 10 years for what.

Page 14 - Investigation – This is in relation to the Bank’s Directors re the ‘winding up order’. A report on the investigation and potential follow up actions was put to the COI on 12th November 2010. End of story as JLs cannot disclose any more due to risk of prejudicing further proceedings – we await what happens next or does not happen next – so no change yet again.

Pages 8 & 16 - Liquidation costs – Page 8 total paid so far inc VAT is £25.303m. Total on Page 16 does not include VAT - a spend of £23.9m compared to their previously estimated overall total of £24.3m. JLs stated in their Jan 2015 Progress Report they could no longer estimate likely costs for remainder of the Liquidation. Worth noting if no more cash comes in, that cash balance we hold at present will go down as future costs are paid out. Although the SL is hopeful that more cash will come in from the loan book.

So, the good news is regarding the PG, hopefully more cash from the loan book, and an end to the Liquidation in around 18 months. But as SL says it is difficult to predict due to the uncertainty of recovery from balance of loans and the resolution of the PG.

The continuing down bits are;

· Still balance of £2.6m Unresolved – to be resolved + £1.5m Unclaimed.
· The Investigation into the circumstances leading up to the Directors decision to seek a winding up order in respect of KSFIOM – no further forward

The above are the comments I felt were worth making. Other people may have others that I have missed, or I felt not important enough to mention. I will update parts of my background data in readiness for the SL’s Quarterly Update due at end of Sept 2015. Based on the current cash total of £8.6m I think there is now £4.129m net available for payments. This takes no account of further costs/expenses, as SL feels he cannot estimate requirements. So as said above if there is no further intake of cash from loan book etc this £4.129m will fall as costs come in (but the SL expects further cash from the loan book).

We are now into quarterly reporting – March, June, September & December, plus two ‘6 monthly reports on 9th January and 9th July each year. Next quarterly report due at end of September 2015.

Hopefully the SL can somehow sell on the PG position, but in the meantime deal urgently with the loan book situation, deal with the ‘Unresolved and come to a conclusion re any Litigation.

But have to say hopefully, things are beginning to move forwards in this last phase, with potentially an end now in site and perhaps a very low loss in the loan book with a figure of around 5.41% max – that would be terrific.

Take care,

And God Bless

Gordon 45

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Thank you

  • Anonymous
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  • Thu, 27/08/2015 - 08:18

Gordon: How very nice to return from holiday and find your message. Thank you once more for your detailed work and clear explanations. Sunny 1

Asking an impolite if inevitable question on 'unclaimed' cash

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  • Tue, 25/08/2015 - 07:29

Some of you Blighters may think this is a question expected of the type of Bounder played with such aplomb by the late, great actor Terry Thomas, but if the 'unresolved' and 'unclaimed' cash -- some £4.1m -- of now permanently departed, (i.e late) KSFIOM depositors who are anonymous, untraceable or without heirs, then who receives the money?

Interest from 8 October 2008 ?

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  • Sat, 15/08/2015 - 06:54

Gordon, many thanks for your thoughtful review of the July 2015 Progress Report.

One thing that puzzles me, however, is why the Report (page 14) states in regard to the Parental Guarantee that " the value of claim which will be agreed under the guarantee will be small". I had understood that the court's guidance is being sought in regard to our entitlement to interest from 8 October 2008 until we actually received dividends. If the court decides we are entitled to such interest then the overall amount would be very substantial (GBP 300 million or so ?) and wouldn't such interest be claimable under the Parental Guarantee ? (albeit we are unlikely to actually receive any more than a small proportion of it).

To D RAM re interest due

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  • Fri, 21/08/2015 - 20:05

Hi There,

Thanks for the comments. Re interest due, I think you are mixing up the IOMC and Iceland - two different scenarios - but maybe I'm wrong.

My view is the IOMC is deciding on the methodology on how to go about allocating the £3.5m for interest due up to 8.10.2008 for those due it and for the very small amount required to pay those not due contractual interest - the SL has that cash available to pay out right now - prob according to Knife Edge is something to do with the IOMG early payments scheme and that is holding up our payment.

My thoughts were the JLs/SL has worked out cash owed under the PG - a long time ago - initially £960m and that that has been downdated as the JLs then the SL has received cash back in. They have not disclosed the current claim value. But we know total assets recovered inc interest so far is £932.890m, so at most a further £27.110m to come to meet the £960m.

You mention a figure of £300GBP and that was probably near the mark in the beginning. If you take the £36.2m mentioned as an upper figure by the JLs over 7 years you would get around £253.40m and if you take the £906.2m owed to creditors from way back and multiply that by 4% compounding over 7 years you get £286.30m. So £300m is around the ball park figure. But I feel it was a bit unkind to mention the £300m then just say it will be a lot less than that without giving some idea of what you think would be returned as it might make people think that something worthwhile might come back.

The Icelandic Government is trying to allow repayment of what is due but has to be careful not to cause their economy to collapse if they allow foreign investors to get their cash back without due care to their country. At the last count the WuC of Kaupthing hf had around 25% cash to alow repayments - it could go down. My very rough scenario gives me around £100m due in interest - I could be way out - just don't know. But if I am correct you then take off the 'haircut' demanded by the Icelandic government so you get around £61m. If you then say payout will be around 25% you get down to £15m. But when would we get that assuming every party agrees to the 'haircut' and as has been said by others if there is no agreement will we have 10 years of fighting to reach some form of compromise? So if as the SL has perhaps indicated he manages to sell off this 'albatross' hanging round our necks to a third party - if he is lucky - what kind of gamble will that person/firm be willing to accept, another 50% cut so we can get paid out. So do we eventually get down to £7-8m from our original £300m? that would mean a payout of around .88p/£. Ok it does not allow for more cash from the loan book or perhaps some of the current £2.6m unresolved getting the heave or perhaps the £1.5m unclaimed might stay unclaimed and also any litigation. But I would love to see what figures you have to show for the the 'small proportion' you mention we might end up with. It would have been better - in my opinion - if you had been willing to go that far to show all of us the eventuality as you saw it..

So that's my tjhoughts for what they are worth. I was not going to spend the time doing my calcs but thought eventually someone had to give some reality to your question.

Take care
Gordon 45

Thanks Gordon - Interest after 8 oct.'08

  • Anonymous
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  • Sat, 22/08/2015 - 02:08

Thanks for your response and all your efforts to explain the situation for me.

However, I'm sorry if i'm being dim (I'm certainly no accountant) but shouldn't the claim agreed be the full amount of interest owing to us at 4% although the amount to be paid to us would obviously be a lot less given that the WuC of Kaupthing hf only has about 25% available to allow repayments and that's before the proposed "haircut" ? My "back of the fag packet" calculation at simple interest is that the full amount of interest at 4% allowing for the phased payments of dividends over the years is in the order of 300 million pounds - maybe I'm wrong.

Thanks again,


To D RAM & Gordon re interest

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  • Sat, 22/08/2015 - 09:47

Hi both,

My understanding is that we are awaiting the ruling of the IOM Court on the whole package of issues related to the calculation and payment of interest, both pre and post October 2008. I would have thought the issues concerning the early payment schemes which appear to be holding up the ruling must relate rather to the post Oct 2008 interest as I don't see how they could affect any entitlement to the deferred interest up to that date. But I suspect payment of any interest may also be held up until a last date for claiming has been officially announced and passed since we know that interest only becomes payable once all agreed claims have been paid out – and I believe the Court also has to agree the relevant dates.

With respect to the post Oct 2008 interest, I agree the amount must be quite substantial but feel there are still too many unknowns to make a reasonable guess beyond the £36 million or so for the first year. After that, interest would presumably be compounded, but also (presumably) based on the progressively reduced sums outstanding following each dividend payment. A small part of the interest due could be paid from further recoveries from the loan book, with the rest constituting the finalised shortfall claim made under the PG.

But – and this may perhaps go some way towards explaining the statement in the JLs' latest report – whatever the amount of the submitted claim, it is the amount that will finally be agreed by the Kaupthing WuC that counts (and to which the JLs refer). At which point, presumably Icelandic insolvency law will play a determining role. I have no knowledge of how this works, but my recollection from the time when some of us submitted individual claims to the WuC (rejected in favour of KSFIOM's claim) is that interest could be claimed for a limited period only – I think until Dec 2009. Whether or not this would apply to a guarantee claim such as ours I know not. But it seems at least a possibility - and no doubt our Liquidator, with his access to Icelandic lawyers, is better informed.

The above is of course independent of the amount of the finally agreed claim that we would actually receive, which we all agree is likely to be a relatively small proportion. My point here is that there are (as I see it) 3 stages - the submitted claim, the agreed claim and the amount of the latter we eventually receive (by sale or otherwise). But we are all fumbling in the dark and I guess we shall – as often – just have to wait and see and trust the accountants of PwC, watched over by our CoI, to do their job correctly and in our best interests once the rules are clarified. Hopefully that will now be sooner rather than later!

Thanks Anriguat

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  • Sat, 22/08/2015 - 14:16

Thanks for your clear explanation.

I agree we can only leave the outcome to PWC and the Col but it's a pity the former didn't explain things better in the first place (or have they and I've misunderstood/missed it ?).

Sorry if I've been overly pedantic.

I truly value the splendid input by you and Gordon as well as many others in the background,


Thanks Gordon

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  • Fri, 14/08/2015 - 09:02

Thank you Gordon,
A light at the end of the tunnel and getting closer.
Thanks for your diligent work.
Rob and Wendy