The SoA and Foreign Currency Deposits

  • frog
  • 10/10/08 13/09/09
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Posted: Fri, 16/01/2009 - 15:34

Up until now I was for a SoA or restructure - but now the math doesn't work for me (I'm a >>50K depositor, but 75% in dollars and the rest in sterling).

The SoA, based on a 5-10% improvement on payout over a liquidation is offset by the exchange rate movements between when the SoA is calculated (9th Oct) and when the liquidation would set as the exchange rate as Mike Simpson confirmed that the exchange rate would be fixed at the date of liquidation (31st Jan potentially)

On the 9th Oct, the exchange rate was $1.76 (approx) and if we have a winding up on the 31st, it will likely be about $1.5 to the pound (about 17% difference).

Entering into a SoA would probably also mean loss of statutary rights as a creditor under liquidation and signing up to a contract which I doubt I'd be able to forsee what I was signing up for properly. This means I'd be accepting an unknown risk while the liquidation rights have been well and truly tested in numerous other cases.

Now if the SoA paid out in the deposited currency, then I would be generally OK with the principle.

What really isn't clear to me is that I would have thought that unless ALL the creditors agreed to the SoA, then essentially some would be losing statutary rights - which surely can't be allowed even if a majority do agree to do this?

I really would prefer a bank restructure - and I'd sign up to a multi-year bond, but unless this exchange rate issue is sorted out, I'll be opposing it strongly and looking to other options including liquidation.

Also I'd prefer that we would all wait until an indication from E&Y on the return from KSFUK before entering into anything - I know that doesn't suit everyone, but it would mean it would be easier to sell or restructure the bank and give more back to the depositors as a whole.

On balance then, another 60 days wait is OK with me - but only if we could get an indication from E&Y in the interim, and Alix complete their evaluation of the loan book.

Note that we all have lost 4-7% of our money anyhow (assuming anything even happens by October).

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I agree

  • jedizippy
  • 15/10/08 21/06/09
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  • Wed, 28/01/2009 - 11:34

I also agree here. MY funds were all in € and USD. I didnt actually have any sterling and dont want any. If this in fact true then its just another blow to an already grim outlook. I am happy to wait for as long as it takes to get my FULL funds back (preferably in the currency they were held and not monopoly money GBP).


The SoA information about Currency is in...

  • frog
  • 10/10/08 13/09/09
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  • Tue, 27/01/2009 - 00:25

Exchange rates will be calculated at a 'Record Date' - which isn't set yet, but in the documents should be in the week of May 11th.


Good news on Exchange rates Calculation Date

  • klauseriksen
  • 10/10/08 31/05/09
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  • Wed, 28/01/2009 - 06:04

Very good news indeed. As I have said all along the SoA should use the same date as the DSC which now seem to be the case


Foreign currency mortgage handling - read Howys Blog Post

  • rapata
  • 13/10/08 03/08/09
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  • Sat, 17/01/2009 - 18:39

Howy - I have posted this on the forums where it may be more visible as I am sure it is of great interest to all

http://chat.ksfiomdepositors.org/blog-entry/currency-mortgage-holder

I have a foreign currency mortgage with KSIOM and have been very surprsied at the actions taken by PWC with regards to these products. Rather than force conversion of the loan back into GBP in order to protect the value of their loan book ( since the asset secured by the loan is in GBP), PWC have withdrawn my right to convert the loan from a foreign currency back into GBP, with the result that I have lost a significant sum on the recent currency move.

As a result the quality of the loan on their books is significantly diminished. I am sure I am not along in this situation. Overall it means poorer quality assets on their books to the detriment of the deposit holders.

PWC have given no reason for doing this and I am taking legal action as a result. I wanted to highlight this on the basis that depositors should now how the assets are being mis managed by the provisional liquidator.


interesting that they will convert deposits to GBP, but not liabilities!


interesting that they will convert deposits to GBP, but not liab

  • Captain Mainwaring
  • 11/10/08 31/05/09
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  • Wed, 28/01/2009 - 06:41

Well someone will have to pay for it.....

I would have thought that an average rate between 8th Oct an date of first payout may have been "fair"


To form a FX Depositholders Group. / Or DIVER should safegurad

  • steelwood
  • 24/10/08 31/05/09
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  • Sun, 18/01/2009 - 13:25

Hi Rapata

It was me who posted the suggestion to form a GROUP, but strangely I could not find my posting.It disappeared.
I do have deposits in USD approx 132K+ some Euro + some GBP.
I will join if any Such Group is formed to safeguard the interest of FX deposit holders alternately DIVER + Co should safeguard for all FX Deposit Accounts holders if he accept to do so.

Two points
If everything must be paidback in GBP use the exchange rate of Payment date
Or to be returned back in Currency of Deposit accounts with no convertion.


SOA & SOBs

  • jkk
  • 10/10/08 31/05/09
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  • Fri, 16/01/2009 - 18:42

Frog, I think you might have spotted the ultimate proof that the proposed SOA could actually have been devised by real SOBs ;-)

The only reason why they insist on the exchange rate as of 9 October is the profit they will be pocketing if the sterling stays as low as it is right now. I can bet my entire grand from the EPS that they will eagerly modify their position in that respect if the exchange rate of £/$ goes back to where it has been a year before i.e. around 2.00.

I think all foreign currency account holders should make it clear that the proposed SOA is a non-starter unless the conversion to sterling is calculated at the prevailing rate on the date of payment or the payment is made in the original currency of the account.


How many foreign currency depositors

  • rapata
  • 13/10/08 03/08/09
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  • Sat, 17/01/2009 - 17:23

As someone suggested (I cannot find the post) the foreign currency holders could represent a fairly large chunk of the deposits which may be helpful in any voting process if it is done by value of deposit.

I suggested forming a group to address our specific needs, and possibly a poll to gather statistics. How do we go about this?

Can we find out just how many depositors hold foreign currency accounts and get an estimate of amounts/currencies deposited - if members were willing to divulge this information. We have approx. 280K USD at stake and DO NOT want our dollars converted.

Maybe a question can be put to MS on the next conference call asking
a) are they still holding any foreign currency deposits, if so
b) which currencies and the amounts of each
c) how many depositors have foreign currency accounts


Currency

  • columbgc
  • 11/10/08 14/07/10
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  • Sun, 18/01/2009 - 06:04

None of our accounts are in GBP and we have about 180K USD with the bank. You are absolutely correct about this point and it should be raised with MS. It would be interested to see indeed how many are in similar situation.


foreign currencies

  • insameboat
  • 12/10/08 31/05/09
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  • Sat, 17/01/2009 - 19:06

Rapata
I have a significant amount in $ and Euro and a very small amount in GBP. I agree that we should address this question in the next conference call. We need an explanation!
If the rate for conversion is backdated, some depositors sustain additional losses. It means that not all creditors will be treated equally.

I agree that there must be a good number of us in the same position. Set up another group? Do all members of our committee hold GBP or are there members that hold foreign currency and can speak on out behalf?.

I deposited in those currencies and am entitled to a return in the same currencies.


The SoA and Foreign Currency Deposits

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 16/01/2009 - 17:06

Answering just a part of your question

Just my reading of s152 CA1931 where the provisions relating to compromise agreements are contained- not a legal view just an interpretation

Firstly any compromise agreement (SoA) would be subject to the approval of the Court.
It would appear that a compromise agreement between the Bank and its creditors would require 75% or more (by value) of the creditors present and voting in person or proxy to agree to succeed.

If such a compromise agreement was approved by the requisite percentage of creditors present, and the court then the provisions of the compromise agreement would be binding on the Company/liquidator creditors and contributories of the Company.

Under a SoA many things are possible, including those that you mention, but this obviously depend on how the SoA was defined.


Right - I think you have this

  • frog
  • 10/10/08 13/09/09
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  • Fri, 16/01/2009 - 17:58

Right - I think you have this right. It would be challengable though in that it penalises a minority set of creditors. I for one would challenge this and would expect that all Euro and Dollar investors with more than 100K involved also to do this.


In the Same Boat

  • steelwood
  • 24/10/08 31/05/09
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  • Fri, 16/01/2009 - 18:19

Hi frog

I am fully agree with you. I do have the same problem . I have funds , 90% in USD and 10% in GBP.
Also when I bought USD I do have paid high price, I am holding it for a quite long time due to echage rate problem. Either payment should be in the deposited currency or use the latest exchange rate at the time of payment if every thing to be returned in GBP


The SoA and Foreign Currency Deposits

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 16/01/2009 - 18:16

Challenge what?

The Court need to approve the compromise agreement, and there isn't one defined yet. I think that currency effects will be just one if the factors that a depositor will need to consider if the motion to go down this road is endorsed on the 29th.

I don't know what the compromise agreement will contain, I guess whatever it does there will be some people disadvantaged, that's why its called a compromise agreement ;-)

It would be better I think to provide input into the people devising the SoA and therefore try to ensure that it can 'please' as many people as possible.

Alix have already commented on the positions vis a vis the intention that it will be 'no worse of than the DCS'

In respect of it being challengeable, any creditor will be able to make representations to the court should they feel prejudiced as a minority by the compromise agreement. It is for this reason I would imagine the Court approval is required, so as to look at whether overall the solution is equitable (fair) - in determining this the court would naturally have regard to the submission of the creditors.

When I have been involved in corporate restructures in the IoM that required court approval there have been a number of 'additional hoops' imposed by the courts (in most cases to enhance creditor rights) so I dont think for one minute that court approval will be a rubber stamping exerciseI

I hope that you take my comments in the manner that they are intended, to be informative and helpful.

I have no involvement with this process, and any terms etc are pure speculation on my part.


@manx-person. I do appreciate

  • frog
  • 10/10/08 13/09/09
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  • Fri, 16/01/2009 - 20:34

@manx-person. I do appreciate your comments.

That's what I meant BTW - challenge it when it is put to the court for consideration (or earlier if possible).

I'm happy to provide input for myself and any foreign-currency holders who would want to combine with me on this. I'm not clear whether this is something which is being considered by the informal DAG committee - although the fact and way the information was reported, I believe that they are aware of the issue.

The comment by Alix that the scheme will be 'no worse off than the DCS' doesn't help as the DCS tops out at 50K while most foreign currency investors are likely to have much more than that invested. If it is better than liquidation, then I'll be more interested to see why.

The only fair way of resolving this is to agree to pay in the original currency, but as Mike Simpson said in the call, there is precidents for payments only to be made in Sterling - in which case, it will have to be done at the rate of exchange at the point of the agreement becoming valid.


FSCS and preference

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 16/01/2009 - 20:53

BTW good news that M Simpson confirmed that the FSCS rank pari passu - I saw that on his recent bulletin


@frog SoA

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 16/01/2009 - 20:48

Well a SoA wouldn't (if the compromise agreement prospectus was so written) be subject to the stated case law by MS in respect of liquidations.

That is one of the advantages of a compromise agreement/SoA - it is a 'designer arrangement' and can be tailored to fit the situation unlike a conventional liquidation.

It would therefore be possible to include provisions in respect of non-GBP depositors


Good point.

  • frog
  • 10/10/08 13/09/09
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  • Fri, 16/01/2009 - 21:55

Good point.


And also to limit the costs

  • Captain Mainwaring
  • 11/10/08 31/05/09
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  • Fri, 16/01/2009 - 21:44

And also to limit the costs of PWC should the SoA allow for their continued apppointment.


exchange arrangement

  • ajrj
  • 09/11/08 31/05/09
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  • Sun, 18/01/2009 - 13:37

i am all for a limit on "expenses". longer this goes on the more is obviously lost. We have over $200k at risk, and would like to think that as the LP has funds for us which have increased in value through the weakening of the pound we should expect to be recompensed in the currency to which we have our deposits in. I would love to know where he has our funds deposited in presently, and any interest gained should be more than enough to offset his charges.


The SoA and Foreign Currency Deposits

  • Anonymous
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  • Fri, 16/01/2009 - 19:42

There is no need for a compromise agreement with creditors. There is a well-established route in insolvency for creditors to recover through liquidation and in addition in this case there are two guarantees, one of which is statutory. Besides, doesn't compromise go against the stated aims of DAG (100% return)?


That could be one of the

  • Captain Mainwaring
  • 11/10/08 31/05/09
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  • Fri, 16/01/2009 - 22:03

That could be one of the reasons why a number of us are opposed to the DCS and it's preferential treatment of creditors.

As a sub 50K is rightfully entitled to 100%, so are the rest - bond holders and businesses.

I should add that early on PWC's costs would seem trivial compared to the sums involved, however they will now start to become rather intrusive on the bank cash in hand.

The SoA with due consideration and the wishy washness removed could still provide for a substantial dividend very early on. The money is there to do it, all that remains is the will.

I am sure we have all expressed our dismay at the EPS amount, especially when it will probably cost a fortune to administer, let them set aside the EPS, and concentrate on making a substantial stage payments so that we can all set our money to work in the manner that we intended in the first place.


The SoA and Foreign Currency Deposits

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 16/01/2009 - 20:13

I entirely agree.

There is no need for a compromise agreement; if proposed it is a matter at the time for the creditors [depositors] to consider.

You are correct that there is a well established route in insolvency for creditors to recover through liquidation.

If it [an SoA] is proposed it will be up to the creditors [depositors] to consider how this compares with the alternatives at that time.

Of course for some depositors the DCS will provide for a 100% return.For others it wont.

In respect of the guarantee by the Icelandic ultimate parent, if the ultimate parent turns out to be impecunious then it may be of limited value.

Although your comments on the availability of assets in K hf, and its validity and the possibility of choice of jurisdiction [forum] should provide comfort to those seeking to rely on the parental guarantee.


Dear Frog,Well put,

  • mikepapa
  • 10/10/08 n/a (free)
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  • Fri, 16/01/2009 - 16:24

Dear Frog,

Well put, constructive comments. I second your opinion.

I am in a similar situation as yourself and note the anomaly between DCS
and SoA with regard to application of exchange rates.

Notwithstanding the above, I agree the key to the issue is an indication
from E&Y of any return from KSF UK, and therefore, whilst uncomfortable
for us all, hopefully we will get some information on this in the next 60 days.

Kind regards,

Mike