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UK Lehman creditors to receive full repayments 5 March 2014

Creditors of Lehman Brothers International Europe’s (LBIE) UK and European operations will recover 100p in the pound with regards to their claims, administrators have confirmed.

Administrators from PwC have confirmed that ordinary unsecured creditors such as hedge funds, asset managers and other banks will fully recoup their claims six years after the collapse of the US bank.

PwC has also announced a £5 billion surplus of cash “could eventually” by made available for further payments to creditors, although this remains the subject of current UK Court disputes.

Tony Lomas, lead PwC administrator and partner said: “The full repayment represents a remarkable feat, following the collapse of the Lehman group in September 2008.

“The fact we have been able to pay ordinary unsecured creditors in full, including the return of their Trust Assets and Client Money, with a significant surplus remaining, highlights the importance of having a healthy level of capital within a firm’s balance sheet.”

LBIE became insolvent in September 2008 as a result of the collapse of parent company Lehman Brothers.

Despite not being “balance sheet” insolvent, LBIE had no liquidity and was “cash flow insolvent”, owing more than £3bn in repayments on the day of its collapse.

Lomas added: “LBIE offers an interesting example to regulators and central banks currently developing ‘bail in’ plans to address the ‘too big to fail’ problem.

“Whilst ‘bail in’ is intended to address pending balance sheet insolvency, PwC’s experience dealing with LBIE clearly demonstrates the very sizeable potential need to support a firm’s liquidity at the same time, where it has high volume, high value and complex trades pending at the point of its imminent failure.”

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