This agreement, signed by administrators in the US, Asia and Europe, is intended to help coordinate proceedings for the largest ever corporate bankruptcy. The insolvency of the bank, which had assets of around $630bn and was incorporated in 40 countries, has led to 75 separate sets of court proceedings. This prompted Alvarez & Marsal, US administrator for the Lehman Brothers Holdings company in Chapter 11 bankruptcy proceedings, and KPMG, which is the administrator for subsidiaries in Singapore and Hong Kong, to create a protocol aimed at alleviating disruption that could be caused by proceedings conflicting with each other.
“In the absence of a single global oversight body, we practitioners must challenge ourselves to explore the limits of what we can achieve, within our legislative frameworks, by agreement rather than argument,” says Eddie Middleton from KPMG Hong Kong.
However, three of the bank’s largest units, namely its US broker-dealer, London-based Lehman Brothers International Europe (LBIE) and Lehman Brothers Japan, have chosen not to sign the protocol, believing it is less useful or relevant to creditors in their jurisdictions.
“The proposed protocol is necessarily high level and aspirational compared with the pragmatic details of our tailored solutions for dealing with the issues arising between LBIE and its principal affiliate counterparties,” says Tony Lomas, joint administrator for LBIE and a partner in the restructuring and insolvency practice at PwC in London.
“A major problem with the proposed protocol is that it is likely to unfairly raise affiliates’ expectations of the level of access and information that it will provide, laying the foundations for potential disputes between parties later in the process. We have ongoing dialogue with those responsible for the affiliates that are central to LBIE and the most significant of these has expressed their own reservations with regards to the proposed protocol,” says Mr Lomas.
