WHAT HAPPENED WITH ING - THE FACTS

  • Diver
  • 11/10/08 31/05/09
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Posted: Sat, 29/11/2008 - 09:44

A lot of depositors still seem to be unclear as to how the transfer of Kaupthing Edge customers took place from KSFUK to ING and are, as a result posting inaccurate comments regarding the KSFIOM assets - more importantly they are posting these comments to the press. Please read this if you are unclear.

When the UK government guaranteed the deposits of Kaupthing Edge customers, it transferred the ACCOUNT DETAILS of these depositors from KSFUK to ING. NO FUNDS WERE TRANSFERRED OUT OF KSFUK.

As the depositors' compensation scheme (FSCS) only covered the first £50k of each saver's funds the government loaned the FSCS the remainder of the money to cover all of the deposits. The FSCS is responsible for 'giving' the money back to the ex-Edge depositors.

The upshot of the above is the following:

1) KSFUK owes the FSCS the funds covered by the original compensation scheme.
2) KSFUK owes the UK government the funds used to top up the compensation scheme to cover 100% of deposits.
3) No funds have been used from KSFUK to pay customers now in ING

So, as you can see, the funds that KSFIOM has in KSFUK have NOT been used to pay off anyone in preference to us. That would probably be unlawful.

If you are going to comment to the press or the media or write letters to them PLEASE MAKE SURE YOU ARE CLEAR ON THE FACTS. Every time we are caught out in passing on incorrect information, especially inflamatory information like 'our funds are being used to pay off UK depositors', all our arguments are brought into question.

Thanks.

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IOM 550

  • shafted
  • 10/10/08 12/12/09
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  • Sat, 29/11/2008 - 18:19

Thanks Diver for your summery i think many inc myself have now the facts, but i cannot see for instance if a commercial say engeneering company goes into liquidation and third party company has a piece of equipment which has not been paid for by the company in liquidation i think the administrators can not sell that equipment as part of the sale, as i have had to return retained goods in the past that i have taken against unpaid rent obviously not legally but have in some instances to return the goods to the owners who are not nessesarily the company in liquidation, therefore why is the 550 not returnable to the owners ie KSF IOM. Can someone comment with liquidation knoledge.


Media Correction

  • srcoates
  • 10/10/08 31/05/09
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  • Sat, 29/11/2008 - 16:07

Diver, you are absolutely correct in what you say and I have corrected myself with a further e-mail to 'Director of Finance Online'

Ormus made a suggestion earlier asking you to provide a document setting the facts out, as you know them, to be a reference point for us all. It seems to me that a 'TimeLine' document incorporating our position paper should be the Gold Standard Reference on our website. I expect that you have your hands full with the legal angle. I would be happy to collate this document and to keep it up-todate. Please e-mail if either the IOM & London teams feel this has any merit


KSF UK & ING & our 550m

  • banna
  • 15/10/08 01/03/10
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  • Sat, 29/11/2008 - 15:40

Diver,
I general I agree with your statement of events to date in KSF UK - with one proviso.

I believe the jury is still out as to whether the UK Govt will take part of our 550m or not : and that depends on whether the UK Govt makes itself a preferred or secured creditor or not and on the level of realised assets in KSF UK relative to the needs of creditors.

If there are sufficient assets to cover liabilities the discussion of secured or preferred creditors versus non preferred creditos is academic. We will all recover 100%.

BUT if there are insufficient assets to cover all liabilities 2 possibilities exist :

a. if the Govt is an unsecured/nonpreferredcreditor it will pick up exactly the same %age of its advance to ING as we do of our 550m

BUT

b. if the Govt forces EY/the court to treat it as a secured/preferred creditor the Govt will receive 100% and we and other nonpreferred creditors will receive a lower %age.

In that case the Govt would have taken some of our 550m to repay itself.

I do not know whether the Govt will declare itself a preferred creditor so I say the jury is still out.

One other point is important. According to EY the FSA will decide whether any creditor is covered by the UK compensation scheme and therefore by the Govt guarantee. If the FSA decides that charities, or LAs or anybody else is so covered they would be paid out in full- to our detriment if assets do not cover liabilities.

I agree with you that we should be very careful what we say inside or outside the DAG - but we also need to be very vigilant about what EY is doing behind the cloak of secrecy. I hope Mike Simson will be representing us at the creditors meeting of KSF UK on Monday 1st Dec and that we learn more thereafter.

On a more optimistic note, past statements by LGA, Christies Hospital and Transport for London might allow us to assume that all creditors´needs will be met in full?


KSF UK & ING & our 550m

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Sat, 29/11/2008 - 19:34

banna regarding your last sentence It has recently occurred to me that the possibility could exist that HMG has privately told these organisations that they would guarantee that they eventually received a govt top-up (to 100%) in the event that the KSFUK payout was less than 100%.
Is it not also worth rememberting that Alan Bell has stated at least twice that he thinks that recovery of the £557M is "highly unlikely." Why would he say that unless he knows something that we don't?


The FSCS can't do this.

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 16:02

They have no legal power to make themselves a secured creditor as the original assets were unsecured.


FSCS can't do it but

  • Alastair
  • 10/10/08 30/09/09
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  • Sat, 29/11/2008 - 16:04

Still good to ask the question and establish the fact.


Ask who? Are you thinking of

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 16:22

Ask who? Are you thinking of the KSFUK creditors' meeting? It may be asked, but either way even if the FSCS try it, it would be challenged by the others who collectively have twice the amount in the bank than the FSCS.


Yes Meeting Monday E&Y

  • Alastair
  • 10/10/08 30/09/09
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  • Sat, 29/11/2008 - 16:35

I have already agreed with you. A lawyers trick is only to ask the questions you know the answers to already. It is good to establish the facts and move on. First we need someone at the meeting Monday.


Really?

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 16:43

I didn't see that.

I have posted a suggestion to centralise our interface with PWC and Alix - if we did this, we'd have a much better chance of ensuring that the questions we wanted asked are actually asked. I believe that the issues we have are exactly the same as these two companies anyway - it is just an issue of lack of confidence in them and getting the answer back.

Anyhow, I repeat my question - do we know if non-creditors will be allowed in to the meeting? Is there anyone who can make the meeting?

When is it anyway - if it is in the afternoon and non-creditors are allowed in, then I could see if I could get there.


E&Y Meeting Where?

  • Alastair
  • 10/10/08 30/09/09
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  • Sat, 29/11/2008 - 17:36

Just looked through the affidavit from E&Y dated 14/11 and I can find no mention of where or what time the meeting will be. I believe it will be only creditors or their proxy who can attend. I had offered to arrange a proxy but that option has now expired as it need to be in by Friday (I'm not certain my friend of a friend could have got one anyway).

Now we rely on one of our members attended as a creditor of Kaupthing UK in their own right or PWC.


I recall it was at the Ritz

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 17:40

I recall it was at the Ritz (but I may have been mixing it up with another meeting). My memory isn't what it was - they say that memory is the second thing that goes with old age....


Ritz

  • shafted
  • 10/10/08 12/12/09
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  • Sat, 29/11/2008 - 18:35

It would have to be the best would`nt it , i only wish i was an administrator wow i could have a good time at the meetings!


Cafe Royal?

  • Ally
  • 13/10/08 31/05/09
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  • Sat, 29/11/2008 - 17:45

Frog

My memory is not what it used to be either, but I thought it was at the Cafe Royal


meeting is at

  • bellyup
  • 10/10/08 09/01/10
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  • Sat, 29/11/2008 - 19:37

The meeting is at the Cafe Royal.68 Regent Street ( near picaadilly circus tube) at 11.00 am
But it is not open to the public only creditors.


We shouldn't just rely on PWC Monday

  • Alastair
  • 10/10/08 30/09/09
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  • Sat, 29/11/2008 - 15:50

As per my last note 5 mins ago in the "where do we go from here 27/11-26/1 forum, I don't think on past performance we can afford to just rely on PWC representing us Monday - we need one of our own at the meeting. To add to my questions in that post I would include banna's :

Is the UK Treasury FSCS in relation to the assets of the K Edge depositors a secured or unsecured creditor.


Treasury/FSCS creditor secured/unsecured?

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sat, 29/11/2008 - 18:56

BC
I asked this question a couple of days ago in another forum, but received no reply. I think this is a unique situation, ordinarily the bank would have failed and gone into liquidation and all individual investors would have been entitled to retail depositor benefits; but HMG effectively bought them all out and can hardly be considered a retail depositor so unless it declared its own underwriting to be a secured/priority/preferential creditor then it will be the converse. Did or could HMG together with the FSCS makes its creditor secured? You would think it likely wouldn't you... Anyone?


Do we know whether they will

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 16:14

Do we know whether they will allow non-creditors into the meeting at all?

Both PwC and Alix Partners will be there I would hope.


Still confused about our UK funds

  • ianhkhi
  • 12/10/08 31/05/09
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  • Sat, 29/11/2008 - 10:07

Diver thank you for the clarity, as usual.

However.... Sorry, I just don't understand how your 2) is the case.

The UK Gov't's decision to go 'above and beyond' the then pertaining compensation scheme for KSFUK depositors is their own decision, isn't it? Nothing in any law about it?

How come then that we have to (directly or indirectly) pay for that decision?


Divers point 2 + ING timing

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Sat, 29/11/2008 - 17:58

ianhki.. I was just about to agree with you re divers point 2 then suddenly changed my mind! I think it's the case that HMG has just joined the list of unsecured creditors replacing all those account owners transferred to ING. and it expects to get a payout proportional to the value of the assets which were contained in all those accounts which were transferred to ING. ie 100% of the value of those accounts if all other creditors get 100% or proportionally less if the payout is less than 100%.

On another subject, I posted this info on another thread yesterday and as usual I 've forgottten where, but it should be of interest here as well.

The events of 8th Oct 2008;
Notice that there was only 2hrs 5 min between the freezing of Landsbanki assets and the transfer of KSFUK Edge accounts to ING. Can anyone say that this wasn't all planned in advance?

The Landsbanki freezing order:
Made at 10.00 a.m. on 8th October 2008
Laid before Parliament at 12.00 noon. on 8th October 2008
Coming into force at 10.10 a.m. on 8th October 2008

The KSFUK Transfer Order: (KSFUK administration & transfer of Edge accounts to ING & KSFIOM assets effectively frozen)
Made at 12.05 p.m. on 8th October 2008
Laid before Parliament at 4.00 p.m. on 8th October 2008
Coming into force at 12.15 p.m. on 8th October 2008

References:
http://www.opsi.gov.uk/si/si2008/uksi_20082668_en_1
http://www.opsi.gov.uk/si/si2008/uksi_20082674_en_1


Re: Still Confused

  • Diver
  • 11/10/08 31/05/09
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  • Sat, 29/11/2008 - 10:25

No one is 'paying' for any decision at the moment. There is no difference to us to whom KSFUK owes the money. If the UK government hadn't stepped in to cover the deposits then KSFUK would still have had the exact same debt to the savers in Edge.

All that has happened is that the UK government has put itself in the place of Edge depositors as a creditor of KSFUK. That's it. No new debt has been created, no more money is owed by KSFUK than before it's just that the money is owed to the UK government instead of 170,000 individual depositors.

The best way to think about it is probably this:

KSFUK owed Edge depositors £2.6bn. The UK government and the FSCS effectively bought that debt form the individual depositors and are now the ones owed the cash.

I hope that makes things clearer.


£550KK

  • chipmunk
  • 13/10/08 31/05/09
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  • Sat, 29/11/2008 - 10:22

So is it true to say that the 550kk pounds transferred from Kaupthing IOM is still somewhere in Kaupthing UK Bank ?

Are the directors of Kaupthing IOM somehow liable for making that transfer....why did they do that rather than keep it in IOM ?

Did that transfer take place on the 6th or 8th of October ?

Probably those questions have been asked many times so I apologise if I frustrate somebody but I still cannot get my head around the sequence of events and just how HMG can take that money and now say that Kaupthing IOM has no connection with Kaupthing UK....


It's actually £628m gross not £550m gross

  • Diver
  • 11/10/08 31/05/09
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  • Sat, 29/11/2008 - 10:40

'So is it true to say that the 550kk pounds transferred from Kaupthing IOM is still somewhere in Kaupthing UK Bank ?'

YES

'Are the directors of Kaupthing IOM somehow liable for making that transfer....why did they do that rather than keep it in IOM ?'

The directors will argue that they believed they were acting in the best interest of the depositors at the time. The money was in Iceland (NOT IN THE IOM) which was clearly unstable so they moved it to the UK which appeared stable.

The funds were almost certainly moved to London and not the IoM as KSFIOM was predominantly a cash gathering entity for Kaupthing Iceland and KSFUK. Whilst it did have it's own loan book, KSFIOM was mainly being used to help finance liquidity in Iceland and the UK...it did not need large cash reserves in the IoM as it needed to 'make the money work' to pay us all the interest on our deposits. That is probably why the cash went to London and not the IoM.

Did that transfer take place on the 6th or 8th of October ?

Neither. We believe there were a series of transfers (not one large one) throughout 2008 going back as far as spring.

'HMG can take that money and now say that Kaupthing IOM has no connection with Kaupthing UK....'

HMG HAS NOT TAKEN ANY MONEY!!!!! This is a very crucial thing to understand. KSFUK is in administration and no funds have left the bank since October 8.

Also, the government is NOT SAYING theree is no relationship between the two banks...all they are saying is that KSFIOM ranks as an unsecured creditor of KSFUK just like all other non-retail depositors in the bank. They are also saying they do not believe they have any obligation to treat us any differently than all the other unsecured creditors (ie. we wont get paid out in preference to anyone else).


Why only Edge depositors?

  • chd
  • 13/10/08 30/09/09
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  • Sat, 29/11/2008 - 13:45

Why did the UK gov. only back up the EDGE clients and not the other creditors? Why did they get the special protection? Isn't that discrimination?


Why Edge Clients only...

  • Alastair
  • 10/10/08 30/09/09
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  • Sat, 29/11/2008 - 13:54

Firstly, they guaranteed all retail customers 100% not just Edge clients but only Edge customers went over to ING I think due to them being internet only accounts. The other retail customers have been given a 100% guarantee but they are still working on the details.

Secondly, why did they guarantee only retail savers. Because they are backing up the guarantee with the money so yes it is discrimination but they have the right to do that.


Why Edge Depositors

  • Ally
  • 13/10/08 31/05/09
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  • Sat, 29/11/2008 - 13:53

They transferred the Edge depositors as these were all retail depositors, i.e. individuals. There was or is no law that says the government has to back anyone up 100% so it cannot be said to be discrimination. During the banking crisis it seems the UK government made it a point of principal that UK residents would not lose out if any bank went under. That is why they are covering the Edge depositors 100%.

There are also covering 100% the retail depositors in other KSF UK accounts, howeever these people will have to make a claim through the FSCS.


Lets All know the FACTS

  • Ormus
  • 19/10/08 31/05/09
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  • Sat, 29/11/2008 - 11:55

Diver - you obviously have a very clear knowledge of the facts here. I think it is crucial for us all to be quite clear exactly what has happened, and from reading these posts it is equqlly clear that many of us, including myself, are labouring under a lot of misapprehensions. As you say, posting these to MP's and newspapers actually harms our case, so before exhorting people to write en masse, could you take the time to post as succinct and concise a summary of the facts as you know them, taking particular account of those misconceptions that seem to be popping up quite frequently. For instance, I have been assuming that Brown/Darling have seized/stolen our money to honour his 100% pledge to KSF(UK) depositors, which does not include us. I also was told that UK govnt "recommended" the transfer of our £550m to the UK for "safekeeping" and then seized it. Your post above makes clear this is not true. Is the only difference between ourselves and KSF(UK) depositors the fact that UK will get back 100% , because of Brown's stand guaranteeing specific UK deposits, while we have to rely on Iceland/IoM, who manifestly cannot afford to copy Brown's guarantee? Because if this is the case then Brown's position becomes understandable, defencible and even laudable. To expect our money back becomes virtually hopeless as we will be just a creditor like anyone else, and while Brown has stood by UK depositors, we cannot expect him to do so to depositors outside his financial jurisdiction. (Unless as a Crown Dependency and UK citizens we can legally require him to treat us preferentially to other creditors). We then have to rely on Iceland/IoM and concentrate on this as well as trying to find a better overall solution than liquidation. It also means that those of us with less than £50k at stake, are increasingly likely to see reclaiming our seized £550m as a lost cause, and decide on at least getting the guaranteed amount back. Not good news for those who have a lot more than this at stake, but who have been well-supported so far by those whose interests might be better served by liquidating ASAP. I think a clear exposition by someone well versed in the real facts would be very beneficial to all.


Ormus, I am afraid you are

  • thesunnysouth
  • 10/10/08 31/05/09
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  • Sat, 29/11/2008 - 18:20

Ormus,

I am afraid you are agin repeating another misnoma about not getting the money back. KSF UK has shed loads of Assets to back up the creditors and E&Y will be doing its level best to get as much back as posible. HMG have a large vested interest and will also try to ensure as much comes back as possible. It may take time but the likelyhood is there will be a near full return. indeed two organisations one of them Transport for London have been told they will get their money back.
So we are a creditor and there are discussions regarding whether we are ring fenced and therefore preferential. If we are not then we will have to wait for payouts but that is a long way from saying we have lost the money. Just as saying HMG have stolen the money is a long way from the truth.

John


KSFUK restructuring

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Sat, 29/11/2008 - 19:50

thesunnysouth...Can you, or anyone, throw any light on what would happen should KSFUK be restructured and have its banking licence restored. Discussions generally assume thst KSFUK will eventually be liquidated but ,as far as I can see, this is not necessarily a foregone conclusion. The KSFUK transfer order includes restructuring as a possible outcome. What would be the status of our £557M in such an event?


Mike, Exactly the same

  • thesunnysouth
  • 10/10/08 31/05/09
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  • Sat, 29/11/2008 - 22:47

Mike,
Exactly the same circumstances as apply if Alix partners get the IoM re structured. Currently KSF IoM owes circa £850m to depositors. A huge chunk circa £400m is tied up in assets i.e the loan book. This is the case in all banks, none could take a run where everyone wanted their money. If Alix can get the bank re structured their would have to be a proviso that the depositors could not take out all their money in one go, or a larger safe and secure bank takes it over and depositors reassurd that the money is now as safe as anywhere so leave the money in.
If th UK bank is restructured (and why not?) the same applies. The govt would want their £2.5b and we would want our .5b etc so immediately a run on the bank. Of course as the HMG is a 50% owner (they are owed £2.5b) they could agree to the bank being taken over by another state owned bank Northern Rock. Most people would be happy to leave money in place, HMG get their money back over time (the same as Northern Rock is now re paying) and IoM bank may even leave the money there as long as the interest rate is OK.
Re structuring can only work if someone can guarantee the funds and that applies to both banks. Finally of course someone could aquire both banks and solve the £550m riddle straight away as they would own the liability as well as be creditor.


Hello Mike

  • uptight61
  • 14/10/08 n/a (free)
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  • Sat, 29/11/2008 - 19:59

I'm sorry I can't answer your question but do you have any idea about how long the liquidation of KSFUK might take? Has a timeframe been banded about on this website for I haven't seen anything?


uptight61. liquidation

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Sat, 29/11/2008 - 21:53

uptight61 This seems to be an unknown factor but I have read that 6 months has been allowed just for the transfer of accounts to ING to be completely finalised! The transfer order makes it clear that the treasury's requirement is that ING takes priority, everything else is of secondary importance.


E& Y comment

  • frog
  • 10/10/08 13/09/09
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  • Sat, 29/11/2008 - 19:57

In their statement (section 3) they tend to rule out rescuing the company as a going concern. They think only the running-down and sale of its loan book (option 2) is what will happen


unsecured creditor versus secured creditor

  • Lucky Jim
  • 13/10/08 31/05/09
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  • Sat, 29/11/2008 - 11:30

Not being a 'bank brain' or an accountant I do not understand why KSFIOM is UNSECURED creditor vis the £550kk . I would have thought that KSFIOM was a SECURED creditor, otherwise any other banking agency could have laid claim to that money at any time, as they are doing right now.

I can't get my brain around the idea that money transferred by KSFIOM from Iceland to KSFUK TO PROTECT IT should now be 'up for grabs' by other agencies who have descended like vultures on the assets of KSFUK (in receivership) which are part those of KSFUK and part KSFIOM. Surely the vultures can only make a claim on what is wholly KSFUK & not what belongs to KSFIOM ?

Simpson in his Affidavit seems to be adopting a laissez faire attitude to trhe 'loss' of most of thet £550kk, appearing to be giving in to the Receiver of of KSFUK. He should be working damned hard to get all of it back to the IOM !


Unsecured vs Secured Creditors

  • jr
  • 10/10/08 31/05/09
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  • Sat, 29/11/2008 - 18:47

Yes, I agree entirely with everything you say. When you look at the obvious closeness of the relationship between KSFIOM and KSFUK, as well as the intention of recent fund transfers into KSFUK (to protect the funds of KSFIOM’s depositors), it seems apparent that KSFIOM should be a secured creditor of KSFUK.

Someone has actually mentioned previous case law on this forum, whereby the intended purpose and/or the relationship of parties undertaking a transaction was considered in deciding whether an entity should become a preferential/secured creditor when a debtor company becomes insolvent.

Hopefully PWC are communicating this position as regards KSFIOM’s assets held in KSFUK, irrespective of whether they were earmarked at the time of transfer as being secured.


jr your comment about the

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sat, 29/11/2008 - 19:02

jr
your comment about the intention behind fund transfers is most interesting and could perhaps help our position considerably if/when push comes to shove...


Thanks Diver.....Very clear

  • chipmunk
  • 13/10/08 31/05/09
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  • Sat, 29/11/2008 - 10:46

Thanks Diver.....Very clear as always....