Linklaters advises as Lehman Brothers’ European arm secures sanction of momentous scheme of arrangement

The UK High Court recently sanctioned a scheme of arrangement for Lehman Brothers International Europe (LBIE), bringing to an end nearly a decade’s worth of disputes and litigation. On 18 June, Mr Justice Robert Hildyard sanctioned the scheme, put forward by the PwC administrators of LBIE, in relation to a £7bn surplus, providing a mechanism for the distribution of interest entitlements to creditors.

Having already been repaid in full, all creditors will have the right to receive 8% interest on their claims, whilst creditors with claims under ISDA-type agreements will either receive an additional payment, or have their interest entitlement determined pursuant to a novel certification and dispute resolution procedure.

The scheme of arrangement is thought to be the biggest ever and also includes a bar date preventing new claims being lodged.

Tony Bugg, Global Head of Banking at Linklaters, says:

"This brings to a substantial close the most high-profile and complex administration in history. The insolvency has been played out in a very public arena with the sheer scale of the collapse and the impact on the global financial markets adding to the unique challenges. To say it is a landmark case is no exaggeration, not least when you look at the wider ramifications and the wholesale regulatory changes that have been implemented in the financial sector as a result of the collapse.”

The Linklaters team was led by Global Head of Banking Tony Bugg, Restructuring & Insolvency partner Richard Hodgson and Dispute Resolution partners Susan Roscoe and Euan Clarke. Linklaters has advised PwC on the Lehman Brothers administrations for the last ten years with lawyers involved from a range of practices across the London, New York and other global offices, including Restructuring & Insolvency, Dispute Resolution, Financial Regulatory, Corporate and Capital Markets.

Other significant milestones among the many set during the decade-long case have been those impacting on insolvency law and practice. These have included the landmark Supreme Court decisions in the Lehman / Nortel pensions case and in what became known as the “Waterfall” proceedings, impacting, respectively, on what constitutes expense, provable and non-provable claims in an administration, and issues such as the existence of certain types of claims arising from converting non-sterling claims into pounds sterling.

Bugg, says:

"Over the last ten years, we have fielded a multi-jurisdictional, cross-practice team of more than 300 lawyers working on complex issues on a scale that has never been seen before. It’s been fascinating to be involved and be at the forefront of something that really has challenged and changed the financial landscape.”