NEW NUMBERS FROM TODAY

  • HOPPER
  • 10/10/08 31/05/09
  • unspecified
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Posted: Tue, 07/07/2009 - 18:13

Folks, in my role as the proxy holder for the HNW Group, I attended the First Meeting of Creditors earlier today in the IOM. Given that I am delayed in the IOM airport, I thought that all depositors would benefit from the following summary of the PWC update which preceded the formal meeting. These are the numbers I wrote down from the update. I am just typing out my notes for your benefit.
Regards
Gavin

Cash Position
- £158m of cash recovered, less £2.7m paid out to give £155m as of 27 May 2009
- Plus additional £93.5m from selling share collateral although this becomes available for distribution in tranches in Sept/Nov 2009 (£65m) and May 2010 (remainder) because of indemnities provided at time of sale to JPM Cazenove
- Plus £5.1m of loans repaid from the loan book
- Total £263m cash, all held now in sterling
Loan Book
- £23m of loans have been recovered since 9 Oct 2009
- 174 loans in the loan book, 157 customers
- Total £418m, with offsets against deposits of £11.3m, so Net £407m
- Majority are interest only, most repayable by 2013, some out to 2017
- Mostly on UK high end residential property
- Analysis has been done of loans where LTV exceeds 60%. This totals £124m of the property value exposure in the book. A desk top exercise on asset price deflation has taken place. This shows these properties are worth £110m now. This is good
- 28 customers are overdue on payments, but mainly these relate to customers claiming set offs (ie. They have deposits in the bank as well as loans from the bank)
CDs
- £18m now received in already
- Plus £35m has now received UK Treasury Clearance to be paid from KSFUK to KSFIOM
- Total £54m
- This £35m can be added to the £263m number above, ie. £298m total
Bank of England Trust Account
- Payments went into this account from 2 to 8 October
- Feb 09 the KSFUK administrators went to the High Court for direction on what to do with these funds (total £147m)
- 19 – 21 May the hearing took place
- Judgement is due this coming Friday
- KSFIOM will incur no costs here (legal etc)
Share Sales
- JJB shares and Booker shares have been sold
- £99.8m total proceeds
- £600,000 still due in dividend payments, but being disputed
- 3 share holdings remain
- 2 are Icelandic, one of which has been delisted. Assumed zero value
- One other shareholding which cannot be disclosed since under dispute, and has not been included in estimated recoveries anyway
KSFUK
- UK dividend of 10p expected this month
- Minimum of 50p in due course
- KSFIOM claim has been lodged
- Clearance to pay to KSFIOM has been given by UK Treasury to E&Y
- The claim includes £349m of deposits, the share repo is still being discussed (agreeing date of termination), 41 derivative contracts with KSFUK (mainly FX and interest rate hedging), £164m of statutory set offs under loan participations
Parent Guarantee
- Winding Up Committee now established in Iceland
- Moratorium ends 13 Nov 2009
- Provisional claim lodged, but quantum of claim will need to be adjusted to reflect make-whole nature of parent guarantee
Habana
- Euro 2.3m transfer to Deutsche Bank, being claimed on Trust by Habana
- Hearing concluded in IOM on 30 April
- No indication of when judgement will be delivered by the Deemster
Banking Licence
- PWC were granted a Banking Licence (IOM) from 29 May 2009
Claims
- £907m total unsecured claims, of which £863m among 11,000 depositors
- Less approximately £11m set off (see above)
Staff
- 64 KSFIOM staff as of 9 Oct 2008
- 25 today
- Employee costs (preferential creditor) of £900,000
Expected Total Dividend to Depositors
- 73p to 88p
- This excludes anything from the parental guarantee, any legal actions and the BoE trust account
JPL Costs
- To 27 May 2009 £3.1m
- Legal advice an additional £1.7m invoiced to date
- SOA costs £620k

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I remember also that the £99M

  • frog
  • 10/10/08 13/09/09
  • a depositor
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  • Wed, 08/07/2009 - 20:07

I remember also that the £99M recovered from the repo agreements which totalled £165M (if I remember correctly) then the amount claimed on KSFUK increases by about £65M (for which we'll get £35M+ back).

I was hoping that the deal done over the booker shares would have made up the shortfall, but anyhow - it doesn't look so.

Also, I thought the price for the JJB shares wasn't allowed to be disclosed until (about) September - in fact I asked Mike Simpson how much had been realised on the repo agreements just a few weeks ago and he said he couldn't say...


Mike Fayle says " in flight money ring fenced " Where is it ?

  • MichaelB
  • 16/10/08 31/05/09
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  • Wed, 08/07/2009 - 09:57

Hopper ... impressive summary. Great work.

I received this response from Mike Fayle in June.

" If you make a DCS claim before the Habana decision is given and it subsequently is in your favour then my understanding is that the in-flight funds are not part of the banks assets and would not form part of your claim anyway - they would be your funds held under quasi-trust. "

If the In Flight funds do not form part of the Banks assests where are they in your summary ?


My understanding of what Mike

  • frog
  • 10/10/08 13/09/09
  • a depositor
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  • Wed, 08/07/2009 - 20:00

My understanding of what Mike Fayle is saying is that if the court rules for the in-flighters (in whatever form) both the equivalent assets and liabilities would be removed from the bank balance sheet. This would probably mean that the in-flighters would become effectively protected creditors, who would get paid out first - and hence from the cash assets of the bank whenever the decision is made.

I understand that about £80M is classified as 'in-flight' but I'm not sure that it necessarily covers all in-flight definitions (requests to withdraw but not actioned for instance in addition to money that actually was in the process of being transferred).


NEW NUMBERS FROM TODAY - MORE INFORMATION

  • HOPPER
  • 10/10/08 31/05/09
  • unspecified
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  • Wed, 08/07/2009 - 08:50

New Numbers from Today
Several of you have asked questions regarding my posting about the numbers. Due to a very delayed flight, I did not get home until the early hours this morning, hence I am answering as many as I can in this one block posting.
Mr Lynton. There was no further information given out over the sale of the bank as a going concern. In my personal view, based on my banking background, any potential acquirer would not want to buy the bank right now. If there is still interest, they would wait until the DSC kicks in and pays out all the smaller depositors. It would be a much more straightforward purchase thereafter. Of interest, in questions later on from the floor, Simpsom did mention that offers of 50 to 70% had been received for the loan book – nowhere near high enough to justify a sale of this one asset.
Hippychickrobbed. The parental guarantee is very important. If there is a shortfall (i.e. if we do not get back 100p in the £), then KSFIOM can claim for any shortfall under the parental guarantee. This will be a general unsecured claim against the Icelandic parent. When I visited Iceland and met the Chairman of the Resolution Committee and the Moratorium Supervisor of Kaupthing Bank a few months ago, they guided us to towards a 20 to 25% rate of recovery. In other words, if we end up with 80p in the £ at the KSFIOM level, PWC will claim 20% under the parent guarantee. If the parent bank is paying out 25%, then KSFIOM gets back 25% of 20%. Hence an additional 5% to bring our total recoveries to 85%.
Roman 2005. BoE Trust Account. The FSA made KSFUK place monies on deposit into a secret trust account at the Bank of England in the period 2 to 8 October 2008. Personally, I find action by the FSA outrageous. This action helped starve KSFUK of liquidity – no wonder it went into administration, taking down KSFIOM with it. There is £147m in this trust account. The administrators of KSFUK have applied to the UK courts to ask for direction as to whom to pay this money too. KSFIOM has put in a claim for some of this amount. How much ? Not disclosed.
Roman 2005. On shareholdings, three remain. Two are Icelandic stocks. One has been delisted from Nasdaq. PWC are counting these both as having zero value. There is one other shareholding. This is also assumed to have zero value for now. Ownership of these shares by KSFIOM is being disputed by a third party.
OhDear. Right now, adding up the numbers, KSFIOM has enough cash either there or shortly coming in to pay us all back 33p in the £ over the coming months. Probably as several payments. Overall, over many years, they currently expect to give us a total of 73p to 88p. However, this range assumes zero from the parental guarantee, zero from litigation (e.g. suing the FSC, directors etc). So there is the possibility of more, but also these are estimates, so there is the possibility of less. The first dividend is due to be paid on 28 August 2009. Previously this has been estimated at 14.5p per £.


Someone to buy the bank...

  • investor01
  • 13/10/08 n/a (free)
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  • Wed, 08/07/2009 - 19:17

Hopper,

Thank you for your concise appraisal of the situation.

With regards to the notion of the bank being bought, I seem to recall reading (although I may have imagined this!) that once a dividend payment is made then the bank is effectively broken and selling it is not an option. In your comments you say that if it were to be sold then a buyer may want to wait until the small depositors have been taken care of.

With your banking knowledge, is my recollection above completely wrong? If so, I'll be pleased that at least this avenue is still open.


Yes, that came from the last

  • frog
  • 10/10/08 13/09/09
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  • Wed, 08/07/2009 - 20:03

Yes, that came from the last call with Mike Simpson. He believed that the bank would not be sellable once the first dividends were paid out. Really the opinion of the potential buyer is the one that really matters, though I would think that on first dividend, there would be a lot of depositors in limbo - partially paid out and partially via DCS and would be painful to unravel.


Thankyou Hopper

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Wed, 08/07/2009 - 09:02

We need people we great banking bankgrounds to explain these important issues


That's why we need Hopper on

  • chd
  • 13/10/08 30/09/09
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  • Wed, 08/07/2009 - 09:13

That's why we need Hopper on CC. Pity people didn't realize this earlier... especially DST


swiss he will patrol them

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Wed, 08/07/2009 - 09:25

I am sure he will be patrolling them..


PWC costs

  • Nixi
  • 20/10/08 31/05/09
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  • Wed, 08/07/2009 - 07:49

"- To 27 May 2009 £3.1m
- Legal advice an additional £1.7m invoiced to date
- SOA costs £620k"

So that's nearly five and a half million quid of our money spent in 8 months... and despite the fact that 80% of depositors (survey now up to 430 responses) think that PWC performance is below average or poor, you supported them and, indeed, stood up in the meeting to do so against the DST.

If they've spent that much in 8 months.. over 5 to 7 years what will it be? Forty odd million of our money?
Doubtless you will get a place on the creditors committee.. I, and I'm sure all other depositors, will watch with interest how you control them without a conflict liquidator.


Nixi - my reply

  • HOPPER
  • 10/10/08 31/05/09
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  • Wed, 08/07/2009 - 08:22

Nixi. Thank you for your reply. I suggest we try our best to keep emotion out of this. Lets have a sensible & professional debate. For the record I did not stand up in the meeting and support PWC. The only person who stood up in the meeting was Robert Coates, who read out a prepared speech during the time at which questions were invited. The Finance Director of Skandia cut Robert short and proposed the Chairman proceeded with the meeting.

You are correct in that I did vote the HNW Proxy in favour of the retention of PWC (resolution 1). This was in accordance with our Committee decision.

I would be happy to talk to you by telephone. I don't know your name, but mine is Gavin Brake. Sarah and Laurance both have my phone numbers. Please call me. I politely suggest that we do not enter into a spat on the website.

Regarding the Creditor Committee I do hope I gain a seat. I believe I can add value for all depositors. Perhaps my posting above illustrates this in part. Do remember that it is a Committee of Inspection, not a Committee of Control.

I would end by saying that I do believe it was a great shame that you and other DST members did not take up the HNW offer to guarantee the DST two seats on the Committee, in return for us having two seats and the insurers having two seats. Personally I worked very hard to convince the insurers to go for this and support the DST in this way. I still do not understand why you and the DST refused these offers of mutual support.

We could be sat here this morning with four representatives out of seven on the Creditors Committee. Instead, we have zero, and the DST have zero. And we have no idea how the Committee will now be formed.


purchase of bank as going concern

  • mr lynton
  • 27/10/08 31/05/09
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  • Wed, 08/07/2009 - 06:12

hopper,
thank you for this much needed information. Was there also any meaningful information given out over the potential sale of the bank as a going concern to any interested parties alluded to in conference calls? It seems the bank is not far off being liquid - has PWC shelved this idea or is it no longer possible?
thanks again


also this parental guarantee

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Wed, 08/07/2009 - 08:21

can anyone shed light on this the parental guarantee? I do find that to be important


Bank of England Trust account

  • Roman2005
  • 04/12/08 31/05/09
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  • Wed, 08/07/2009 - 03:27

Hi Hopper,

Could you clarify what exactly is the Bank of England Trust account and what the outcome this Friday could mean for KSFIOM depositors. Reference is made to 147 million pounds, Could some of this total be recovered by KSFIOM depositors and if so what is believed to be the likley value/percentage ?

You refer to three additional share holdings. Are all these believed to be worth zero in value or just the one that has been delisted ?

Thanks

Roman2005


BoE trust account

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Wed, 08/07/2009 - 06:30

I hope you don't mind me adding some comments

Early in October (for about 7 days I am afraid I dont have the exact dates), the FSA required that KSFUK place an amount matching any deposits that they received in an account with the Bank of England.
The funds in this account were intended to be held in trust for those depositing the funds.
KSFIOM have placed a claim for their share of the trust account, and the decision on this is expected on Friday this week.


update on numbers

  • HOPPER
  • 10/10/08 31/05/09
  • unspecified
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  • Tue, 07/07/2009 - 18:50

thanks swiss. for everyone, just to be clear, from what i heard today this means that roughly a third is "in the bag" i.e. 33p per 100p. and this does include anything from london or the bulk of the loan book or iceland or lawsuits etc. this is positive, but let's not kid ourselves, now is where the real work starts in terms of recovering assets, and each subsequent 1% recovery will become harder. but i must say that these numbers today were slightly ahead of my expectations


Clarify further.

  • Ohdear
  • 13/10/08 31/05/09
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  • Tue, 07/07/2009 - 18:59

Hopper, thanks for your clear explanation so far.

i am just confused by several points, I hope you can clarify. Firstly in your first message you mentioned "Expected Total Dividend to Depositors - 73p to 88p"; in your last message you mentioned 33p per 100P does that mean so far we have guarantee of 33p but we expect to see much more?

I am confused by all the messages ..etc and as am not financially very literate (just a stupid man who saved money in Derbyshire and paid tax to UK, thinking that's the best way) anyway when do we expect to see some money coming to my acocunt? How long do we have to wait, can you please (use simple language please) explain what should I be expecting from now? I have applied to Depositors compensation Scheme.

Many thanks.


@ohdear

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Tue, 07/07/2009 - 20:05

Maybe I can help clarify, I was at the meeting.
The 73-88p/£ is the expected final outcome for creditors at this stage but was stated to exclude.
i) Any proceeds that may be received from the BoE trust action (judgement expected Friday)
ii) Any shortfall that may be paid under the parental guarantee.

The initial dividend payment is I understand going to be around 14.5p/£ and payable, I understand next month.

The 33p/£ that Hopper referred to was the amount of 'cash on hand' compared to total creditors (i.e. gross recoveries).

The 73-88 range was stated to be based on a number of assumptions including 50p/£ realisations from KSFUK.

The way the 73-88 was expressed was that it would be the calculation after liquidators and legal fees.

I hope this helps


Thanks Hopper...

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Tue, 07/07/2009 - 18:56

Thanks Hopper, its the real work like you say we have to patrol...we will get there..


At last clarity of numbers

  • chd
  • 13/10/08 30/09/09
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  • Tue, 07/07/2009 - 18:39

Thank you Hopper for these welcomed numbers. You have shed some light on many uncertainties. At last someone has given us some clarity. Can't thank you enough for all you have done towards the fight. Keeping fingers crossed that you get on the CC. You deserve to be there, and we will all benefit greatly from your presence.


swiss he has to be on the cc

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Tue, 07/07/2009 - 19:08

swiss he has to be sitting there its in everyones intrest, one needs people like that on board, he is on the ball..
I will sleep tonight..