DAG solicitors' email on SoA threshold and related issues

  • Anonymous
  • unspecified
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Posted: Mon, 27/04/2009 - 13:07

This e-mail dated 22 April 2009, from DAG's solicitors to Treasury and LP's solicitors, is copied into one of my postings below. I think that deserves special attention from DAG members, especially as it pre-dated by several days the announcement of the change of SoA threshold and brings us up to date generally.

Dear Sirs

Kaupthing Singer & Friedlander (Isle of Man) Ltd

Emails of 14 and 17 April

We refer to our emails of 14 and 17 April. We have not had a response. We repeat the points made therein. In the absence of a satisfactory response we are instructed to seek appropriate redress from the Court.

We note that the announcement on the website has been slightly amended. It remains however inaccurate. It says at one point;
“If the Scheme is given approval by the creditors, the Scheme will be sanctioned by the Courts on 27 May 2009 and at that point become effective. This will be the effective date of the Scheme.”

That is simply not accurate. The Scheme may be sanctioned on 27 May. That is dependent upon what representations are made at the sanction hearing. Further 27 May is not the effective date of the Scheme. The Scheme becomes effective on the later of either the sanction hearing or of effective approval by the Courts in London.

As we set out below it is absolutely vital in the circulation of a scheme of arrangement that creditors have accurate information so that they can decide the issues based on that information.

Further we repeat that it was accepted by your counsel that the graphs presented to the Court at the last hearing were inaccurate. Fresh graphs were going to be produced showing the correct position. In addition, further graphs to reflect the new classes of depositors are required. These were to be provided to us. Can you please forward them by return.

Dividend from Kaupthing Singer & Friedlander Limited (in Administration)

We now have the progress report from the Administrator of Kaupthing Singer & Friedlander Limited (in Administration) for the six month period from 8 October 2008 to 7 April 2009. This reports at page 17 that the current intention of the Administrator is to pay a first distribution in June/July 2009 of 10p in the £. The Administrator reports further that it is his intention to pay further distributions at regular intervals thereafter. He estimates that “on the basis of current forecast recoveries from the banking book, prudent estimates at realisations from other assets, and based on the maximum estimates as unsecured claims, and current market conditions not deteriorating, the administrators currently estimate that total distribution should be a minimum of 50p in the £.”

It is right as the Administrator says that this is an estimate at this stage. It is clear however that the Administrator is taking a conservative view in reporting that the payment will be a minimum of 50p in the £. This suggests strongly that it will be in excess of this figure. Further the payment of the first dividend into KSF (IoM) alters the cash flow presumptions for payments either under the Scheme or a liquidation.

This announcement has a significant impact on the presentation to the Court in relation to the Scheme of Arrangement. The transcript of the last hearing records that there was a debate, between Counsel on behalf of the depositors and Counsel on behalf of the Treasury and the Bank, as to the likely return of monies to depositors within the Scheme of Arrangement or liquidation. In particular Mr Hacker on behalf of the Treasury and the Bank made it clear that if the distribution to creditors of the Bank were less than 60p there were advantages to creditors through the Scheme. This formed the basis of his presentation. Mr Chambers said to the Court, without demur, that if dividend to creditors of the bank were to be in excess of 60p there were positive disadvantages to the Scheme of Arrangement to creditors and certainly those falling into the third class of creditors, being those with deposits in excess of £50,000. Mr Hacker questioned what evidence existed that there would be a dividend in excess of 60p.

It is now clear that based on Mr Simpson’s submissions and indeed the presentations made to the Action Group by Mr Spellman and AlixPartners together with the most recent announcement from the Administrator of Kaupthing Singer & Friedlander Ltd (in Administration) that the dividend will exceed 60p in the £. Accordingly the position has altered significantly since the hearing and it is now clear that the foundations of the presentation of Mr Hacker to the Deemster have no continuing application.

In our submission this is a matter that should be referred back to the Court immediately since the position has changed so significantly.
In the absence of reference back then it is clear that reference must be made in the Scheme documentation and the Explanatory to the Administrator’s announcement and its effect on the Scheme of Arrangement and the Explanatory Memorandum in what is now circulated to creditors.

Asset value

There have been various presentations over time as to the book value of assets held within the KSF IoM. This ranges from the presentation made to the Depositors' Action Group indicating assets of £993 million to Mr Simpson’s early evidence of assets amounting to £906 million to the figure included in the draft Explanatory Memorandum at appendix 1 of £720 million. We must say we do not understand that last figure and it does not equate with either the figures appearing above it in that appendix or indeed the general presentation as to the asset position. We ask that this figure be explained or amended. Depositors have repeatedly requested that the value of the company's assets be properly disclosed. As stated above, this may well affect the way in which they vote. To the extent that the company refuses to provide this information, the scheme will be open to challenge whether of not it is approved.

Revision of Scheme

When discussions took place both at the Court and previously on the proposals by which the Isle of Man Treasury is entitled to recover its debt when other creditors have received 60p in the £, there was no indication of the likely level of distribution from the Administrator of the UK company. Now that we have that information from the Administrator, the 60p limit appears wholly out of kilter with the ultimate dividend. In our belief if the Scheme of Arrangement is to go ahead (we have made our position clear on that) this figure should be revised substantially. Our clients are prepared to discuss this issue with representatives from the Treasury and the Bank at your convenience. We would hope that such discussions will avoid any disputes in relation to the creditors meeting and the subsequent sanction hearing. In the absence of agreement the Group remains opposed to the Scheme as currently structured and will recommend that its members oppose it at the meeting.

Yours faithfully
David Greene
For Edwin Coe LLP

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parallel universes, quantum suicide, many-worlds interpretation

  • Anonymous
  • Offline
  • Mon, 27/04/2009 - 15:38

I am really sorry that the posting above has appeared no less then 3 times. Either it is the result of a technical error on the website or else there are 3 of me in parallel universes all posting simultaneously. My guess is that it is most likely the former, because it is inconceivable that the same series of errors and incompetent actions by governments in relation to the collapse of KSF could have occured in more than one universe.

parallel universes, quantum suicide, many-worlds interpretation

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
  • Offline
  • Mon, 27/04/2009 - 16:44

Have you also made three parallel EPS2 claims? If so that would explain the IOMG processing backlog