The long-awaited dividend payment from Lehman Brothers Australia (LBA) was finally made in December. After prior dividend payments in September 2015, June 2016 and February 2017 (all payments less than one year apart), creditors needed to wait almost five years for the current dividend payment of 14.844% of accepted claims to be made. We estimate total distributions made were around $59,570,000.
Cumulatively, claimants who made claims early in the process and therefore were able to recover their full amounts from the insurance scheme have now recovered over 78% of their admitted claim amount (approximately 75% recoveries for those who claimed later and were unable to access the insurance scheme). For most claimants, this amount covers all principal so the resultant loss from these investments is likely a loss of interest only. Recoveries will also vary depending on the costs of making a claim. For those funded through the legal action by IMF (now Onmi Bridgeway) over half the recovered amounts may have gone in legal and funding fees (the funding fee alone amounts to around 40% of the latest dividend payment for many clients).
Those who elected not to go with a litigation funder, including the thirty seven claimants who engaged Amicus, made much higher returns. However, if the original claimants, Parkes, Wingecarribee and Swan Councils had not engaged a funder, there would likely have been no claim and no claimant would have made any recovery at all.
The dividend paid in December is not the final dividend payable as the bankruptcy procedure is not officially concluded. Our understanding is two issues remain. The first is a refund of with-holding tax paid from His Majesty’s Revenue and Customs (HMRC) (the UK’s equivalent of the ATO) which is still owed to LBA. It is unknown when this will occur, but our understanding is payment is largely procedural and the amount of the rebate while substantive in absolute terms will not result in a large dividend payment.
The second issue is a potential lawsuit against Fitch Ratings agency where LBA believes it has a supportable claim after it was discovered that Fitch’s credit ratings on CDOs produced by its model were increased several notches using a hidden table with apparently no analytical basis. If the claim is progressed and is ultimately successful, then monies will likely flow to the estate and result in further dividend payments to creditors.
We would encourage clients to treat this final dividend when it occurs as a “windfall” and for all intents and purposes to regard the current dividend as the final “material” payment from the LBA estate. We make this suggestion largely due to the uncertainties regarding the Fitch claim in terms of its chances of success, the timing of any potential payments made and the quantities of those payments. In the scenario of a long court case, any final payment could be up to five years in the future.
Ironically, given there is still monies left in the estate, for any investor who lost monies on structured products distributed by Lehman Brothers Australia (or its forerunner Grange Securities), there is still time to claim. Under insolvency law, any claimant who is admitted now has priority payment status for any back dividends paid to other claimants before any additional dividends are declared. Hence, a new claimant will recover over 75% of its claim amount should its claim be admitted (which Amicus is highly confident it will be if it is able to mount a similar case to all previously admitted claimants). Please feel free to call Amicus on a no obligation basis if you have not claimed and think you may have a claim.
