Lehman Brothers Australia (LBA) made its most recent dividend distribution on 19 December 2022. All surplus monies held by the Liquidator within the LBA estate were distributed with just a nominal sum of funds retained to maintain the company to the end of the bankruptcy process in all scenarios.
The major issue preventing complete finalisation of the bankruptcy was an outstanding potential lawsuit against Fitch Ratings Agency. LBA decided not to fund the prosecution of this claim itself (with creditors funds) due to the risks involved, but rather to either look for a funder to bear the legal costs and downside risk of an unsuccessful claim in return for a share of the upside if the claim proved to be successful. LBA also considered the option of simply selling the claim rights to a third party for an upfront fee and was open to offers on this basis or a combination of immediate and deferred fees depending on outcomes.
This situation has not changed over the last eight months with negotiations with various parties being ongoing. It is now also possible LBA will decide to discontinue with the process if no acceptable offers are received from either funders or buyers. Depending on which of these routes is pursued (when a final decision is made) the bankruptcy may be completed relatively quickly (within the next year) or could extend for the length of the lawsuit against Fitch (an indeterminate length of time and almost certainly longer than one year).
In all scenarios, Amicus expects any final dividend made to be “small” (although absolute quantities will likely vary substantially between a simple wind-up of the estate and a successful claim against Fitch). The total accepted claims by the LBA estate exceeds $400 million and therefore while monies being held back or potentially realised from a successful claim against Fitch (including an out of court settlement as has happened in similar cases) may seem substantial in absolute terms, simple maths indicates each $1 million generated and made available to all creditors for distribution amounts to only 0.25c/$ (or 0.25%) of their individual claim amounts. The previous dividend payment in December was “substantial” only because the Liquidator had over $60 million of funds to distribute.
Please feel free to contact Moray Vincent on an ongoing basis with any questions you may have on the LBA bankruptcy.
