Lehmans waterfall II A and B—Lomas v Burlington Loan Management Ltd; Re Lehmans Brothers International (Europe)

Lehmans waterfall II A and B—Lomas v Burlington Loan Management Ltd; Re Lehmans Brothers International (Europe)

We look at the two recent waterfall II judgments (waterfall II A and waterfall II B) in Lehmans to see what guidance the court gives on statutory interest and rule 2.88 of the Insolvency Rules 1986, SI 1986/1925 (IR 1986) and also whether various post-administration agreements entered by the administrators and creditors release claims to statutory interest and/or currency conversion claims.

Original news

Lomas v Burlington Loan Management Ltd; sub nom Re Lehman Brothers International (Europe) (in administration) [2015] EWHC 2269 (Ch), [2015] All ER (D) 11 (Aug) (Waterfall II A).

In the administration of Lehman Brothers International (Europe) (LBIE), the Chancery Division addressed the administrators' application for directions regarding the entitlement of creditors to interest on their debts for periods after the commencement of that administration. The court construed IR 1986, r 2.88 and its provisions for the payment of statutory interest.

Lomas v Burlington Loan Management Ltd; sub nom Re Lehman Brothers International (Europe) (in administration) [2015] EWHC 2270 (Ch), [2015] All ER (D) 20 (Aug) (Waterfall II B).

The Chancery Division addressed the construction and effect of agreements made since the commencement of the administration. It held that the agreements did not have the effect of releasing currency conversion claims or claims to statutory interest under IR 1986, r 2.88.

What are the key take-aways from Waterfall II A and Waterfall II B?

The key points to note from Waterfall II A are:

  • IR 1986, r 2.88 provides a complete code for the payment of post-administration interest on proved debts-there is no additional non-provable claim for further interest
  • where the statutory interest is calculated at the judgment rate (currently 8%), it is payable on a simple, not compound basis
  • when calculating the daily rate of statutory interest at the judgment rate in a leap year, the calculation should use 366 days (see para [242])
  • with statutory interest, dividends are

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.