Creditors of the European arm of Lehman Brothers will receive at least £5bn to cover interest on their debt after a Supreme Court judgment on issues relating to the US investment bank’s collapse in 2008. However, the UK’s highest court on Wednesday dismissed a £2bn currency conversion case by creditors who had argued they should be compensated for losses caused when they swapped their dollar claims into sterling. The pound has fallen in value since 2008.

LBIE has a large surplus, estimated at between £7.5bn and £8bn, after paying out unsecured creditors in full.  There are Several legal actions between groups of creditors seeking payments from the surplus are under way. PwC, the administrator of LBIE, has been seeking guidance from the courts as to where the money should go.

The ruling means creditors will receive at least the statutory interest rate of 8 per cent and share at least £5bn before junior creditors receive any monies. However, legal battles remain about whether even higher rates of interest should be payable.

Tony Lomas, PwC’s lead administrator on the case, welcomed the ruling: “We are continuously focused on resolving the issues that prevent us from distributing the £7.5bn surplus so we welcome the . . . Supreme Court judgment,” he said. “The judgment clarifies some high-value and important matters concerning claims for currency loss, subordinated debt and shareholder contributions, all of which will help determine who is entitled to the LBIE surplus and how large that surplus will be.”

Rupert Reed QC, a commercial chancery barrister, said the court had taken a strict approach to applying the Insolvency Act and rules. ‘The Supreme Court’s judgment contains a number of significant findings in relation to administration,” he said. “In particular, it has, by a majority, overturned the Court of Appeal in rejecting the right of creditors under debts denominated in a foreign currency to recover compensation for losses arising from the depreciation of sterling after the date of entry into administration.”

PwC is expected to work until 2020 untangling Lehman.

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