Post 8 Oct 2008 Interest issues

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
Posted: Wed, 17/08/2016 - 19:08

As has been noted elsewhere, detailed information was posted on the bank website on 9 August 2016 regarding the (agonisingly slow) progression of the Court proceedings to determine how interest for the period from 9 October 2008 should be calculated:
http://www.kaupthingsingers.co.im/2016/august/9august2016/

Having just returned from a welcome internet-free holiday, I am only now beginning to get to grips with the various documents, which include a general description of the present situation, copies of Simpson's Application to the Court for directions made on 22 June 2016 with his associated witness statement dated 20 June, a preliminary Court Order made on 8 July 2016 and a Letter to Unsecured Creditors (as required by the Court Order) dated 9 August 2016.

Basically, 3 alternative arguments are being put forward as to the correct method of calculating and paying interest out of the (limited) available surplus assets (currently estimated to be approximately £15m):
- in accordance with the provisions of Section 23(4) of the IOM Bankruptcy Code 1892 (yes – that’s not a typo!), simple interest at 4% pa to be calculated on a day to day basis until the surplus runs out (likely to be around 150 days from the start of the liquidation on 9 Oct 2008); this is the argument proposed by the Liquidator & his legal advisors
- section 23(4) applies as above, but simple interest to be calculated at 4% pa from 9 Oct 2008 to the current date, with the available surplus distributed pro-rata
- section 23(4) does not apply and KSFIOM (having paid 100% of the admitted claims in the liquidation) should now be treated as solvent (even though there are wholly insufficient assets to pay contractual interest in full up to the present date) and interest should therefore be calculated according to the various and varied contractual interest entitlements of individual creditors.
Arguments for these 3 alternatives will be presented to the Court by 3 separate Counsel, to whom any particular points you wish to raise can be forwarded via the Liquidator’s office at no cost to yourself. Unsecured creditors can also request to become a party to the application (for example, because you wish to advance a fourth alternative), although this will involve costs and – given the relatively small sums involved - seems (to me) to be most unlikely to be cost-effective.

In response to a query by Golightly on another thread, I made some preliminary observations: http://chat.ksfiomdepositors.org/forum-topic/some-thoughts-sls-6-monthly...

For convenience, I am recopying them here and suggest that further comments specific to this topic be made here and not (or not only) in Gordon’s thread relating to the July Progress Report to Creditors.

The table provided in paragraph 20 of Mike Simpson's witness statement dated 20 June suggests that, under his preferred scenario (KSFIOM remains insolvent and post 8 Oct 2008 interest is calculated on a day-by-day basis until the surplus runs out), we could expect to receive between about 1.24 p/£ and 1.39 p/£ (in addition to any deferred pre 8 0ct 2008 interest that resulted from the 5% cap that was applied to uncapitalised interest, which is payable in priority and will differ between depositors). However, in the Letter of 9 August, it is stated that, due to recent exchange rate fluctuations following the Brexit vote, the likely surplus is now estimated at around £15m (compared with the previous estimate of between £11.2m & £12.6m). If confirmed, this would suggest we might receive around 1.65 p/£.

It is clear, however, that should the Court rule that KSFIOM should now be treated as solvent (which seems crazy to me, but Manx law on this is a mess and who knows what will be decided), the cost of dealing with the much more complex issues arising "will inevitably reduce the amount of the surplus assets available for its creditors" (see points 16 & 17 of the witness statement).

It seems to me, although I think it is not explicitly stated, that the other alternative - that KSFIOM remains insolvent but interest is calculated over the whole period since the liquidation began and then distributed pro-rata - would also be likely to incur a certain (though smaller) additional cost, thus also reducing - albeit to a lesser extent - the available surplus and thus the outcome for all unsecured creditors (to no-one's material benefit since, for a fixed total sum available for distribution, the p/£ would - unless I am much mistaken - be no different from the first alternative).

I have however other concerns regarding the position of the DCS (or rather the FSC as Scheme Manager) & the IOM Treasury in all this, as I suspect they may be defending the latter alternative in order to be able to claim a share of the interest that they will receive in relation to the rights that were assigned to them (paragraph 10 of the witness statement) - to the obvious detriment of DCS claimants. I expect to have more to say on this when I have had a little more time to reflect.

5
Your rating: None Average: 5 (7 votes)

Comment viewing options
Select your preferred way to display the comments and click "Save settings" to activate your changes.

Court judgment handed down

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Wed, 28/06/2017 - 09:08

As announced on the bank website, the Deemster has now handed down his decision in respect of the calculation of interest: http://www.kaupthingsingers.co.im/2017/june/28june2017/

This concerns interest for the period post 9 October 2008, which - according to this judgment - should be calculated at the statutory rate of 4% pa over the whole period until the 'date of distribution' (which I presume means the date of the final distribution) and then the available amount divided pro rata (as there will be nowhere near enough to pay the whole amount). It has no bearing on the deferred interest which resulted from the 5% cap that was imposed on uncapitalised pre-Oct 2008 interest, which - as has been repeatedly stated by the Liquidator - should be paid entirely in priority.

Mike Simpson has informed me that his lack of any further comment at this stage is because they are 'considering the best way forward'. He also informs me that the parties involved in the case have six weeks to appeal. So I suspect we are unlikely to hear more for some time to come.


Thanks for the news. Is this

  • sambururob
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Tue, 04/07/2017 - 07:20

Thanks for the news. Is this just a 'kicking the can down the road' exercise? Should we be happy or disgruntled?


@sambururob

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Tue, 04/07/2017 - 09:42

"Should we be happy or disgruntled?"

Probably neither. I would say rather thankful that a necessary and important step forward towards a resolution of this issue has been taken. As ever, the wheels grind slowly, but it is nevertheless a significant step forward.

We now have to wait to see whether or not any of the parties appeal the ruling. Then for its implementation. The delay is however not crucial (for now) as this interest cannot in any case be paid out until the rest of the liquidation is completed - which requires notably settlement of the still-outstanding loan and sale of the remaining Kaupthing hf shares and notes.

The decision to retain the statutory interest of 4% pa is less favourable to those who had high contractual rates than to others. But the alternative would have required the bank be declared solvent, which always seemed a crazy idea to me.

The decision that interest should be calculated over the whole period and divided pro-rata (rather than on a day-by-day basis until the money runs out, as proposed by the Liquidator), while probably the most logical, is bad news for DCS claimants as it means the DCS will almost certainly seek to retain some of it. The thinking of the DCS is clearly outlined in the witness statement of Mike Fayle: http://www.kaupthingsingers.co.im/2016/october/20october2016/
I suspect they will need to go back to the Court for a ruling on this, which will cause further delay - at least for DCS claimants.


THANKS

  • mikepapa
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Thu, 13/07/2017 - 15:40

Many thanks for your explanation Anrigaut.

Kind regards,
Mikepapa


Thanks anrigaut. A clear

  • sambururob
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Tue, 04/07/2017 - 15:09

Thanks anrigaut. A clear explanation. Very useful.
Have a good day.
Rob and Wendy.


Update re Interest.

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Fri, 09/12/2016 - 06:58

At the Court hearing on 16 November 2016, a timetable was agreed and a further hearing fixed for Thursday 23 March 2017.

An update to this effect, with copy of the Court Order, was posted on the bank website on 6 Dec: http://www.kaupthingsingers.co.im/2016/december/06december2016/


Interest

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
  • Offline
  • Fri, 09/12/2016 - 17:01

Just a minor point.
How can KSF (IOM) be considered solvent if it still has not paid all the contractual interest that was due on the date of insolvency? My understanding was that the interest due was capped to be compliant with IOM legislation relating to the fact that the bank was insolvent. Until that "missing" interest has been paid the bank surely remains insolvent!
We should therefore not have to wait for payment of the capped interest until the court decides.
I may have misinterpreted the legislation but to a layman that seems to be the case.


Capped interest

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Fri, 09/12/2016 - 20:01

Hi Brabander,

I have asked several times why the deferred (capped) interest (which is not the subject of the ongoing Court proceedings and for which there is more than enough cash in hand available) cannot be paid out now. I have never received a totally clear response. However, my understanding is that the reason is connected to the costs of making each distribution and not with any need to await the Court decision. Frustrating as it may be (and is!), it seems the Liquidator has decided to wait until all is resolved and he can make one final distribution, after which the liquidation can be brought to a close.


Thanks for the update

  • sambururob
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Fri, 09/12/2016 - 09:56

Thanks for the update Anrigaut


Court hearing adjourned to 16 November

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Thu, 20/10/2016 - 14:59

The Court hearing to obtain directions for the calculation of interest was adjourned until 16 November 2016 to allow a creditor who has requested to become a party to the Application to prepare a submission. Four other creditors (of which I am one) not wishing to become party have submitted their views to the Liquidator and these have been submitted to the Court. As I understand it, the hearing on 16 November is unlikely to be the end of the story....

For full details and witness statements of Mike Simpson and Mike Fayle (for the DCS), see the update on the bank website here: www.kaupthingsingers.co.im/2016/october/20october2016/


COI position

  • Knife Edge
  • 10/10/08 31/05/09
  • a depositor
  • Offline
  • Sun, 18/09/2016 - 19:00

Hi

The COI has not been asked to approve or authorise the Sole Liquidator's position on this issue, although we've been kept in the loop - but for my own part, I don't mind saying that I support it, and I think you can infer from the position he's taking that the COI supports it.

All the best
Knife Edge


Thank You Anrigaut what does the COI recommend?

  • fight theft
  • 10/10/08 28/05/13
  • a depositor
  • Offline
  • Mon, 12/09/2016 - 16:57

Thanks you so much Anrigaut re your posts and recommendation and updates. As always - You and Gordon are or most appreciated stalwarts..

I know what you mean about a beneficial break from the internet - I had one recently and - it was a refreshing change , and so have vowed to spend fewer hours on it daily, and sometimes leave it off at weekend and holidays..:.
...Unlike the horrible days of 2008 .2009 where i was spending from 9am to 2am on this site daily with shingles, bad nerves and a bad back like many of we poor victims of this all consuming crime at the time when we had no financial returns, but for the pathetic 1000 GBP from the IOM Compensation fund!. Ha what a horrible time for all of us - how can we trust the IOM Government or maybe even Manx courts even now....Let us pray they and Mike Simpson and the COI will do their best and fairest for us.

Many victims/unsecured creditors of Kaupthing all around the World ended up worse than many of us in the long run since we have finally our 100% back after 6.5 years If the law was I do think it incredulous ., or maybe his is just what one expects from laws laden with corruption, after many years of in depth investigation form the International Fraud Squad the convicted Kaupthing Directors finally go to their Champagne and Caviar prison . The sentence is reduced and their dirty money is still somewhere safely hidden in the British Virgin Isles etc. I cannot understand how it is not found and seized and returned to those pension funds, banks, companies and individuals who were bankrupt from these Bankers actions.

I was just ploughing through the large envelope of documents form Mike Simpson, reading through to see whether we have to action/support or sign anything... Your answer is we do nothing no return signatures or anything back to return Mike Simpson?

I think Mike Simpson has done a fair job for us to date.. Best to you all with thanks. Suzanne fight theft


Hi fight theft,Good to hear

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Tue, 13/09/2016 - 08:17

Hi fight theft,

Good to hear from you. To respond to your question at the end: your understanding is correct - you are not required to return anything to Mike Simpson. As explained in his letter, arguments for the alternative proposals will be put by the 3 Counsels (and any others who may request to become active parties to the application), after which a decision will be made by the Court.

However, as he then adds, "any particular points that you may wish to make to the Counsel concerned can be forwarded to my office" - ie to ksf(?)iom [dot] pwc [dot] com This is what I have done with the two letters attached in a separate thread. In these letters, I concentrated on my particular concerns over the (unstated) position and intentions of the DCS, but hope I also made it clear that I believe the alternative proposed by the Liquidator would be the most cost-effective and thus of benefit to all creditors. Mike Simpson has since confirmed to me that he will attach my letters and any other communications from creditors (including those with claims assigned to the DCS) to his next submission to the Court. So it's up to you.


Concerns re the position of the DCS

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Sun, 04/09/2016 - 19:07

As intimated earlier, I have now posted in a separate thread copies of two letters I have today submitted to the Liquidator's office expressing my concerns re the position and intentions of the DCS with respect to interest for the period from 8 October 2008.

See here: http://chat.ksfiomdepositors.org/forum-topic/post-8-oct-2008-interest-co...


Comments from Mike Simpson

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Fri, 26/08/2016 - 07:49

I sent the link to my post at the head of this thread to Mike Simpson and asked if he could confirm that I had not misrepresented anything. He has now replied as follows:

"I have read your post to the DAG website and I think it is accurate. It is very frustrating to have to go through this process and I realise it has probably served to wind up creditors who, understandably, can't see why it should be so complicated. The Court will seek a sensible and fair approach and hopefully we will resolve the problem soon."

He also confirms that - by agreement with the Court - "the letter to unsecured creditors was not sent to DCS claimants as, strictly, they are not creditors", but that he will nevertheless be "very happy to receive and communicate their views to the Court on the same basis as direct unsecured creditors - I will differentiate between them in my submissions but I certainly would not withhold their views".

He adds "I think that, if they are going to raise issues with me, I should be in addition to the DCS and not instead of." To the best of my knowledge, the DCS has not communicated with its claimants on this issue, but the fact that the IOM Financial Services Authority as Scheme Manager is cited as co-defendant with the IOM Treasury in Simpson's Court Application should provide an opening for this.


Is action needed by individuals?

  • sambururob
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Thu, 01/09/2016 - 17:10

Hi Anrigaut,
In the light of Mike Simpson's letter which you were good enough to highlight by way of the Shout box is there anything that we, as individuals, are meant to do to register an interest? I would have thought after circa 8 years of the DCS and MS doing everything that they would not need telling that we would like any interest due to us. We are about to set out on a long trip and just want to know if we are going to be missing out on important letters dropping through the letter box!!
Thanks for your ongoing help, alertness and over views.
Rob and Wendy


Hi Rob & Wendy, There is no

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Fri, 02/09/2016 - 07:05

Hi Rob & Wendy,

There is no need for anyone to "register an interest" as such - we are of course all well known to the Liquidator and, where relevant, to the DCS and neither can doubt that we would like any interest due! Nor is there now any doubt that some interest will be due. What is at issue is exactly how the interest relating to the period after 8 October 2008 should be calculated and paid.

As stated in Mike Simpson's letter, any points individual creditors might wish to make regarding any of the alternatives can be communicated to the Counsel concerned and he has confirmed to me that he is also willing to receive and present to the Court the views of those whose rights in the liquidation were assigned to the DCS.

As can be seen from Mike Simpson's Skeleton Argument (posted separately on the bank website), the arguments for and against the idea that KSFIOM could now be regarded as solvent (crazy as that might seem) are highly technical and I suspect few if any among us could usefully contribute to that debate. For my part, I firmly believe that, in his application to the Court, the Liquidator seeks the most cost-effective solution which would maximise the interest to all unsecured creditors. I do however have particular concerns over the position and intentions of the DCS towards its claimants which I intend to submit very shortly to both the Liquidator and the DCS. Once these are finalised I will post copies on both DAG websites. Others may of course act as they think fit.

Have a good trip!

Anrigaut


Thank you Anrigaut

  • sambururob
  • 10/10/08 n/a (free)
  • a depositor
  • Offline
  • Fri, 26/08/2016 - 18:42

Thank you Anrigaut for keeping abreast of this. Always worrying when the IoM financial authorities or courts are involved. Mike Simpson seems to have done good work for us up to now and so we hope he can drive through alternative 1.
Rob and Wendy


Agreed. The involvement of

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Fri, 26/08/2016 - 19:09

Agreed. The involvement of the Court is normal, and without the apparent dissent of the Financial Services Authority (IOMFSA, which replaced the FSC) and the IOM Treasury would I think have been pretty much a formality.

As noted above, the unstated reasons behind this dissent give me cause for concern with respect to the DCS claimants. Mike Simpson is well aware of these concerns and I shall shortly be submitting them formally both to him and - as he suggests - to the IOMFSA as Scheme Manager for the DCS


I'm registered through the

  • ianw
  • 14/10/08 n/a (free)
  • unspecified
  • Offline
  • Fri, 26/08/2016 - 15:58

I'm registered through the DCS and this now explains why I've not received any written communication regarding the three options etc. I wonder how many others are in this position and no longer monitor the forum?

Ian


@ianw

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Sat, 27/08/2016 - 12:03

A very large number I suspect, which is why I raised the question.

Of the over 10,000 depositors & bondholders, I understand only about 900 remained as unsecured creditors directly in the liquidation and would thus have received the written communication. Of the remainder, around 6400 were fully compensated by the EPS or DCS (and thus highly unlikely to have continued to monitor either the DAG sites or the bank site), around 1200 were life company bondholders and the rest (about 1500) were (like you - and me) partially compensated by the DCS and subsequently received payments from the Liquidator via the DCS. I suspect many of the latter groups no longer monitor either the DAG sites or the bank site regularly.


Surviving Account Holders: The Dwindling of the Swindled?

  • VikingRaider
  • 10/10/08 31/05/09
  • unspecified
  • Offline
  • Fri, 07/10/2016 - 00:06

Thanks for the breakdown of those involved, anrigaut. However, I wonder how many of the 10,000 are still 'with pulse'?

One hesitates to express what some uncharitable souls may deem mercenary sentiments, but I fear younger depositors may express little concern regarding the duration of the winding-up process as the number of creditors having fallen off their perch since 2008 continues to grow.

Remember that great Ealing comedy 'Kind Hearts and Coronets"?

As this depositor (and live and kicking parent) may expect little more than a few hundred quid, the above does not apply.