SoA compared with Pari Passu payments

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
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Posted: Tue, 21/04/2009 - 19:46

The latest information from E&Y and Simpson has resulted in a substantial improvement in the magnitude of future Pari Passu payments.
The principal advantage of the SoA is the fact that this includes "guaranteed" payments to depositors at specific dates. It is believed by some DAG members that if the bank was liquidated and the DCS was triggered the top up payments through the DCS could be lower, slower and less secure.
I believe that it is impossible to guarantee what would happen if the DCS was triggered.

For this reason I have developed a spreadsheet that compares the SoA payments with the Pari Passu payments only ie without considering the DCS.
This spreadsheet is attached. It should be noted that I have used the lowest recovery estimates confirmed by E&Y. It is hoped that the LP will be able to provide more detailed information regarding the expected asset recovery rates during the coming weeks.
My calculations show that depositors with £90,000 or more would receive much lower payments under the SoA than under normal Pari Passu distribution.
Depositors with under £70,000 would benefit from the proposed SoA but only if the IOMG failed to pay any top up payments under the DCS. It is debatable whether this assumption is realistic.
Depositors between £70k and £90k would receive more money from a Pari Passu distribution during 2009 but the top up payments under the SoA could give them a benefit during later years.

The clear conclusion is that the SoA has very definite and undisputable disadvantages both in qualitative and quantative terms for all depositors with £90k and over.
For depositors with under £70k it should be recognized that there may be some quantitive advantages to the SoA. The smaller the deposit the more significant the advantage may be.

Hope this helps DAG members when making a voting decision.

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SoA v pari passu only, Apr 09.xls9.5 KB
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Just to Clarify

  • podather
  • 10/10/08 31/05/09
  • a depositor
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  • Tue, 21/04/2009 - 20:12

This compares the SOA against the dividends declared by the liquidator based on the additional recoveries from the UK?

The bank levies of £9.6 million a year and the up to £92 million of funding pre-approved by Tynwald as its contribution to the DCS are not included ?


DCS

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
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  • Tue, 21/04/2009 - 20:45

You are absolutely correct Podather!
I left out any assumed payments through triggering the DCS as a number of vociferous proponents of the SoA have cast doubt on the likelyhood that the IOMG will honour their obligations under the DCS within a reasonable time frame. I personally believe this scenario to be extremely unlikely.
In that event Pari Passu distributions would still make the SoA financially NOT attractive to depositors with £90k and over. The situation is less clear for depositors with £70k-£90k.
Depositors with <£70k could have a financial advantage through earlier payments but would of course sacrifice some legal rights.
In addition, I believe, that the additional expenses associated with the SoA would reduce the overall money available for distribution.
These calculations are very relevant as the IOMG has stated that in the event the SoA is rejected (as is likely!) the bank will be put into liquidation.


Change to spreadsheet

  • Brabander
  • 15/10/08 31/05/09
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  • Tue, 21/04/2009 - 19:50

To those unfamiliar with spreadsheets:
You can change the figure in the yellow field to match your own deposit. The Pari Passu distribution figures will be changed dynamically.
None of the fields are protected!


great help

  • chd
  • 13/10/08 30/09/09
  • a depositor
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  • Tue, 21/04/2009 - 20:45

Thank you Brabander for taking the time to do the spreadsheet. It has really helped to put things into perspective. You should maybe send it to IOMT and Alyx, since we are all still waiting for their chart!

I am convinced that they are dilly dallying on purpose, so that it will be too late for those of us across the globe to send in our vote.


Spreadsheet

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
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  • Tue, 21/04/2009 - 20:50

Please note that all the information I used to compile the spreadsheet is in the public domain.
It is a pity that we have insufficient up to date information from the LP. I would have been more confident of my calculations if this information had been available.


Thanks

  • Julienne
  • 16/10/08 31/08/09
  • a depositor
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  • Wed, 22/04/2009 - 09:10

Brabander - thanks for taking the trouble to do the spread sheet - as others have said how come it take you 2 days to do it with stats that are available in the Public domain but the IOMT can't yet do one and they must have access to info that has not yet been released.


Thanks Brabander

  • chris watson
  • 23/10/08 31/03/10
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  • Wed, 22/04/2009 - 00:27

For your analysis.


Analysis

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
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  • Wed, 22/04/2009 - 17:43

Chris, thanks for your praise.
As you have seen from my analysis I believe that the SoA is probably (dependant on the operation of the DCS) the best solution for smaller depositors who should vote for what they feel is best for them. I see no reason why they should vote against the SoA just because it is disadvanteous to the higher value depositors. On that point I agree with your comments.
I do however feel agrieved that we had to wait for over 6 months to get to this point. In addition I no longer believe that the LP is totally independant. The LP has also incurred substantial additional costs which the creditors have had to bear.
I am not sure whether under Manx law the LP is required to exclusively represent the creditor's interests. I believe a liquidator would have had this obligation.
Hopefully we will soon be at the situation we should have been at the end of 2008.