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20 October 2021

Charles Russell Speechlys successfully advises the Joint Liquidators of LB GP No.1 Ltd in Lehman Brothers litigation before the Court of Appeal

Charles Russell Speechlys LLP’s restructuring team has successfully acted for Bruce Mackay and Matt Haw of RSM UK Restructuring Advisory LLP, the Joint Liquidators of LB GP No.1 Ltd, in litigation before the Court of Appeal concerning LBGP’s claim to be paid funds out of the Lehman Brothers “waterfall”. LBGP is a company within the Lehman Brothers Group, whose purpose was to raise regulatory capital for parts of the Group.

The initial litigation and recent Appeal concerned, amongst other things, the competing priority of multi-billion US$ subordinated debt structures. The Court of Appeal’s judgment is essential reading for those advising on issues relating to: regulatory capital, subordination of debt, contractual rectification, contractual interpretation and guarantor claims in the context of insolvency.

The Court of Appeal was unanimous in granting LBGP’s appeal of the first instance judgment of the High Court and agreed with LBGP’s claim that its subordinated claim ranks above that of LBHI (the ultimate parent of the Lehman Brothers Group). The value of the funds to flow down the Lehman Brothers “waterfall” is estimated to be between £800m to £1bn and a portion of those funds will become available for distribution to subordinated creditors (including LBGP, acting as general partner for 3 limited partnerships).

The Charles Russell Speechlys team acting for RSM UK was led by Corporate Restructuring and Insolvency partners Dan Moore and James Hyne who instructed Lexa Hilliard QC and Tom Roscoe of Wilberforce Chambers (at both first instance and appeal stages).

Dan Moore, Partner, Charles Russell Speechlys said: “We are delighted that after 3 years of litigation, the Court of Appeal has unanimously accepted LBGP’s grounds of appeal and agreed with LBGP’s claim that its subordinated claim ranks above that of LBHI.”

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