The saga continues—post-administration interest and how to handle it (Re Lehman Brother International (Europe) v Burlington Loan Management)

The saga continues—post-administration interest and how to handle it (Re Lehman Brother International (Europe) v Burlington Loan Management)

Katherine Hallet, barrister at Three Stone, considers the latest decision in the Lehman Brother litigation in which the Commercial Court considered how administrators should handle post-administration interest in particular circumstances.

Original news

Re Lehman Brothers International (Europe) (In Administration); Lomas and others v Burlington Loan Management Ltd and others [2016] EWHC 2131 (Ch), [2016] All ER (D) 81 (Aug)

The Companies Court determined six supplemental issues arising out of two previous judgments raised by the administrators of Lehman Brothers International (Europe) on an application for directions.

What practical lessons can those advising in this area take away from this case?

The judgment gives very specific direction on how administrators should handle post-administration inter-est in particular circumstances. It is especially useful when read together with the earlier judgments in Waterfall IIA (Lomas v Burlington Loan Management Ltd [2015] EWHC 2269 (Ch), [2015] All ER (D) 11 (Aug)) and Waterfall IIB (Lomas and others v Burlington Loan Management Ltd and others [2015] EWHC 2270 (Ch), [2015] All ER (D) 20 (Aug)). In addition, part of the decision deals with post-administration interest pursuant to standard form agreements frequently made by administrators, which construction will therefore be applicable beyond this case.

What was the background to the case?

The judgment dealt with six supplemental issues which arose from two previous judgments of David Richards LJ—Waterfall IIA and Waterfall IIB. Waterfall IIA and Waterfall IIB concerned respectively:

  •  generic issues regarding the entitlement of creditors to interest on their claims for periods after the commencement of the administration, and
  •  the effect of agreements made in largely standard form between Lehman Brothers International (Europe) (by its administrators) and creditors on their claims for interest and non-provable currency conversion losses

The administrators sought directions on the six issues.

What were the issues before the court?

Supplemental issue 1b
How is an independent right to interest that ‘arises

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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.