This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Frequently Asked Questions

NATURE AND PURPOSE OF ADMINISTRATION 
1) Why did Landsbanki Guernsey Limited (“LGL”) go into Liquidation?

2) I have heard that LGL has been put into Liquidation. What does this mean?

3) How can depositors or creditors be represented in the Liquidation process?

REPAYMENTS TO DEPOSITORS
4) Will any further repayments be made to depositors in 2011?

5) How much of my money am I likely to receive back?

6) Why will I not receive all of my money back?

7) If I do not request a part repayment now will I be disadvantaged?

8) We have a joint account, will we be entitled to two amounts of each payment on account made available?

9) I have funds in Euro (or US Dollars). Will my funds be treated any differently?

10) I had a currency (non-Sterling) account which was converted automatically on 7 October to pounds Sterling. Is this fair given the pound has devalued against other currencies since this date?

11) Will I continue to receive interest on my money?

12) Will I be taxed on the interest I have earned on my money in 2008 and thereafter?

13) I am an EU resident and had opted to be treated as a retention tax payer rather than “exchange of my information”. Will I suffer retention tax on any payment of accrued interest made during the Administration/Liquidation?

14) I am a customer and I believe I have a priority claim. Will I receive my money in full?

15) Will my bond be treated the same way as any other deposit?

16) I have received the interim distribution from the Joint Liquidators using the required forms but what happens to the remaining 15 in pound of the amount I am owed?

17) Why do I need to complete the depositor proof of debt form?

PAYMENTS TO CREDITORS OTHER THAN DEPOSITORS
18) Will other creditors be treated the same as depositors?

19) When will the creditors be paid?

DEPOSITOR COMPENSATION SCHEMES / GOVERNMENT SUPPORT
20) Will LGL be covered by the Depositor Compensation Scheme (“DCS”) in Guernsey?

21) Are my deposits covered by the Icelandic or UK Depositor Compensation Schemes?

22) Will the Icelandic Government, States of Guernsey, UK Government, IMF or the banking industry in Guernsey support LGL’s depositors?

LANDSBANKI ISLANDS HF / ICELAND
23) I have been following the discussions between HM Government in the UK and the Icelandic Government, particularly in respect of the outstanding loan to the parent and a parent company guarantee. I would like to know whether LGL will be able to recover monies deposited with its parent, Landsbanki Islands hf and whether Landsbanki Islands hf will settle any shortfall outstanding to creditors to enable LGL’s obligations to be settled in full?

24) Have the Joint Liquidators commenced legal action against the Icelandic Authorities as approved by the Court on 9 September 2009?

25) Are the Joint Liquidators considering taking legal action against the Icelandic Government outside of Iceland?

26) Did the actions of HM Government in the UK in placing a Freezing Order over the assets of Landsbanki Islands hf result in a reduction in assets available to pay LGL’s depositors?

27) I have heard that Deloitte LLP (the UK firm) ("Deloitte") have been appointed to assist the Resolution Committee of Landsbanki Islands hf with the strategy for communication and consultation with the creditors, to provide assistance to the Icelandic financial regulator (“the FME”) in determining the value of the assets transferred to the “New bank” and to assist the Winding Up Board and Resolution Committee with their investigation into LIHF’s activities and financial matters. Does this result in a conflict of interest for the Joint Administrators of LGL? 

HERITABLE BANK PLC (“HERITABLE”)
28) Why did Heritable in the UK go into Administration?

29) I understand that the UK retail depositor book of Heritable was taken over by ING by a Statutory Instrument. What are the prospects of such a solution for depositors of LGL?

30) Have the Administrators of Heritable provided any indication of the likely recovery for creditors of Heritable?

31) Why did the Joint Liquidators sell LGL’s claim in Heritable Bank Plc?

DISPOSAL OF OTHER (NON LOAN) ASSETS HELD BY LGL
32) Have the Joint Liquidators disposed of any assets held by LGL to date?

PRE-ADMINISTRATION/LIQUIDATION ISSUES
33) I am a depositor and requested my monies to be withdrawn before the Administration on 7 October. My request was either denied or not completed. Why am I being treated as any other depositor?

34) My deposit was in the process of being withdrawn and was stopped in the payment process following the appointment of the Administrators. Is this legal?

35) Have the Joint Liquidators investigated the role of the GFSC in the events leading up to LGL being placed into Administration/Liquidation?

FURTHER PROGRESS UPDATES / ACTION GROUPS
36) What will happen now? Will I be provided with more information?

37) Why can’t we have regular updates on all the activities of the Joint Liquidators?

38) Are the Joint Liquidators a member of any of the Landsbanki action groups?

39) Can you provide further communication by mail as I do not have access to the website?

NATURE AND PURPOSE OF ADMINISTRATION
1) Why did Landsbanki Guernsey Limited (“LGL”) go into Liquidation? 

LGL is a subsidiary of Landsbanki Islands hf, an Icelandic bank. On 7 October 2008, due to the deepening problems of the Icelandic economy and in particular the banking system, the Board of Directors took the decision that it was in the best interests of creditors to put LGL into Administration.

During the Administration process, the Joint Administrators realised the majority of the Loan Portfolio with those remaining being mainly development loans where the underlying residential property developments need to be built out rather than sold to realise their maximum recovery.  This is also the case for the Heritable loan books where the remaining Structured Property Portfolio loans are also mainly residential property development loans which require time to build out and the Residential Mortgage Book (which has a long life) and is estimated to have a significantly better run off value than current sale value.  Hence there has been a slow down in the realisation of the remaining assets.

As the strategies for LGL’s remaining loans have now been set, the Joint Administrators were of the view that, in order to reduce costs associated with the Administration, that LGL should be placed into Liquidation as the purposes of the Administration could not be further achieved.  That is, placing LGL into Liquidation now would not result in a lower return to creditors than remaining in Administration.

Further to the Court hearing held on 7 December 2010, LGL was placed into Compulsory Liquidation and Mr Rick Garrard and Mr Lee Manning appointed as Joint Liquidators.

Back to Top

2)  I have heard that LGL has been put into Liquidation. What does this mean? 

Control of LGL has been passed to the Joint Liquidators, Mr Rick Garrard and Mr Lee Manning of Deloitte LLP who will now make all decisions going forward. A Liquidator is an independent third party appointed by the Court who remains under the control of the Royal Court of Guernsey (the “Court”).

Back to Top

3)  How can depositors or creditors be represented in the Liquidation process? 

The Liquidation is subject to the oversight of the Commissioner appointed by the Royal Court.

Where appropriate, the Joint Liquidators encourage the representation of the depositors and other creditors in Commissioner’s meetings.

It may be of assistance to the Commissioner for the depositors and other creditors to agree among themselves to form committees to instruct advocates and present the position of the respective groups of creditors to the Commissioner or to the Court where claims are disputed and referred to the Court for resolution. 

At the Creditors meeting held on 20 January 2009, Creditors voted to form an Informal Creditors Committee (“ICC”) and appoint an ICC Advocate. The ICC consists of five elected members and is chaired by the Joint Administrators. Details of the members of the ICC were published on the website on 21 January 2009 and can be accessed via the following link:

http://www.deloitte.com/dtt/0,1002,cid%253D243996,00.html

Whilst the ICC has no formal powers the Joint Liquidators have agreed with the Court for the ICC Advocate to represent the ICC in Court and intend to continue to consult with the ICC on matters arising in the Liquidation.

All depositors and other creditors are free to seek individual representation at Court or propose alternative Advocates as they deem appropriate.

Back to Top

REPAYMENTS TO DEPOSITORS
4) Will any further repayments be made to depositors in 2011? 

The Joint Liquidators have made an interim distribution of 85 pence in the pound to depositors together with ring-fenced interest up to 19 January 2011.

Following the sale of the Heritable debt, the Joint Liquidators will not make any further distributions to creditors until the final dissolution of LGL unless significant sums are recovered in respect of LGL’s Icelandic debt in the meantime.   This is not expected to be until the end of 2011 at the earliest.

Back to Top

5) How much of my money am I likely to receive back? 

Based upon the current expectations of the level of recoveries to be made on LGL’s assets, the Joint Liquidators are able to revise their estimate of the total recovery for depositors to in the region of 87p to 91p in the pound (following the sale of the Heritable debt). These recoveries remain dependent on the recoveries from the loan portfolio and Icelandic litigation which, in many respects, are outside the Joint Liquidators’ control and therefore it is possible that the level of recovery could be outside of this range.

Back to Top

6) Why will I not receive all of my money back? 

The Joint Liquidators do not expect to recover 100 percent of the deposits held with LIHF and Heritable (refer to questions 25 and 30 for further information on this).

Due to the extremely difficult market conditions, the Joint Liquidators do not expect to recover 100 per cent of the balance held in the Loan Portfolio.

The Joint Liquidators therefore believe that the only way for depositors to receive all their money back is if LGL receives aid from a Government or other third party or LGL or its depositors are successful in their legal actions in Iceland. Further, the Chief Minister of Guernsey has stated that he will not use taxpayers’ funds to support any such pay out to depositors.

Back to Top

7)  If I do not request a part repayment now will I be disadvantaged? 

Interest on ring-fenced funds has been credited up to 19 January 2011 based on the normal short notice rate offered by our bankers, being 0.2%.

From 19 January 2011, no interest will be paid following the completion of the adjudication process and the announcement of the interim distribution to creditors as there is no longer an option for depositors to defer repayment.

Back to Top

8)  We have a joint account, will we be entitled to two amounts of each payment on account made available?

Payments on account are no longer being paid.  The distribution of 85 pence in the pound distribution approved by the Commissioner on 19 January 2011 is not optional and will be paid to all depositors and non-depositor creditors (less payments on account previously paid) as soon as the Joint Liquidators receive depositors bank details and cleared funds made available from the sale of the Heritable claim.

Back to Top

9)  I have funds in Euro (or US Dollars). Will my funds be treated any differently? 

The amount you are due is now fixed by LGL as a Sterling amount, calculated using the interbank exchange rate prevailing at 8am on 7 October 2008, the date LGL went into Administration.  All future payments will be made in pounds sterling.

Back to Top

10)  I had a currency (non-Sterling) account which was converted automatically on 7 October to pounds Sterling.  Is this fair given the pound has devalued against other currencies since this date? 

All depositors were advised in our letter dated 16 October 2008 of the Court’s decision for all balances to be converted to pounds Sterling. This matter has been reviewed by the Joint Liquidators, the ICC and the ICC Advocate and the position remains unchanged.

Depositors have been given the opportunity to withdraw cash which is available and place it in a currency account with another bank.  The remainder of depositor balances cannot be maintained in currency when the Joint Liquidators are uncertain of the value of assets to cover any currency exposure. Extensive explanation of the Joint Liquidators ' position has been given to depositors affected by this conversion who have made enquiries and a meeting was held with impacted depositors who chose to attend the meeting.

During the adjudication of claims at the Commissioner’s meeting on 19th January 2011, disputes previously raised by foreign currency depositors were withdrawn.  However, during the meeting it was noted that, if a full recovery of depositor balances were ultimately possible (please refer to question 6 in relation to this) this matter could be reconsidered, but it is inappropriate for the Joint Liquidators to work on the basis of this eventuality given the current circumstances.

Back to Top

11)  Will I continue to receive interest on my money? 

LGL will calculate interest post 7 October 2008 at the margin offered prior to the Administration.  However, no interest after 7 October 2008 will be credited or ultimately paid (other than in respect of the ring -fenced funds referred to in the answer to question 7) unless there are surplus assets available after full settlement of all creditor claims as at 7 October 2008 and costs of the Administration/Liquidation (please refer to question 6).

Back to Top

12) Will I be taxed on the interest I have earned on my money in 2008 and thereafter? 

The States of Guernsey Income Tax Office (“ITO”) has issued a Statement of Practice in relation to the treatment of bank interest for Guernsey tax payers where access is restricted due to the bank going into administration or liquidation. By concession, the Director of Income Tax has agreed that any interest accruing since 1 January 2008 will be assessed to income tax in the normal manner but on request the collection of tax due on this interest will be deferred. In addition, where depositors have made withdrawals in the period from 1 January 2008 to date, by concession these will be treated firstly as capital payments and lastly as interest.

Full details of the concessions agreed by the Director of Income Tax (together with details of the information which needs to be provided to the ITO by depositors to obtain this concession) can be found on the ITO website using the following link:

http://www.gov.gg/ccm/treasury-and-resources/income-tax/website/publications/zero-10-statements/32-banks-administration.en

The Joint Liquidators approached the Jersey Income Tax Office with a view to obtaining concessions for Jersey Tax payers in relation to the treatment of unpaid bank interest.  Whilst the Tax Office have given positive feedback to the Joint Liquidators, it is unlikely that a formal Statement of Practice will be issued in Jersey.  As such depositors resident in Jersey should take this matter up directly with the Jersey Tax Office.

Depositors resident in all other jurisdictions will have to take this matter up with the relevant tax authorities for their jurisdiction.

Back to Top

13)  I am an EU resident and had opted to be treated as a retention tax payer rather than “exchange of my information”.  Will I suffer retention tax on any payment of accrued interest made during the Administration/Liquidation?

As was noted in the Joint Administrators’ Fourth Interim Report, Guernsey will move to a full “Exchange of Information” (“EOI”) basis from 1 July 2011 with early adoption allowed from 1 January 2011.

The Joint Liquidators have decided to adopt this approach from 1 January 2011 and as such all EU resident depositors who had previously opted for retention tax will automatically be moved to an EOI basis.  This means that information on interest payments credited to depositors’ account will be provided to the Guernsey Income Tax office which then provides the information onwards to home nation tax authorities.

It has been agreed with the Guernsey Income Tax Office that, as each individual depositor’s claim (which included accrued interest up until the date of Administration) was not fully adjudicated until 19 January 2011 and payments made were “held on account for LGL”, the interest was not deemed to be “credited/paid” to the depositors until 19 January 2011 and hence tax retention/ EOI was not required until this date.

The Joint Liquidators have made the decision to adopt the EOI basis early so that distributions can be made to all depositors without the deduction of retention tax.  As tax would be payable on all interest amounts included in the admitted claim and ring-fenced interest received (as shown on the 19 January 2011 statement), it is likely that depositors would suffer tax on interest which may ultimately not be recovered.  As such, the Joint Liquidators have taken the view that it would be beneficial for depositors to receive amounts gross of tax and that the treatment of interest received can be taken up with each individual’s home tax authority.

Those EU Resident depositors who had previously opted to be treated as a retention tax payer rather than EOI have suffered retention tax of 20% on each payment on account of accrued interest made to date.  As such the tax deducted will be returned to those depositors as part of the interim distribution process.  The value of this refund is included on depositor’s statements of account as at 19 January 2011.

The Joint Liquidators will be required to report to the Guernsey Income Tax Office the interest which had been credited to each EU depositors’ account during 2011 before 31 March 2012.  For this purpose, the Joint Liquidators will be reporting the interest accrued up to 7 October 2008 (the date of Administration) and the ring-fenced interest accrued on each EU depositor’s account.  The amounts to be declared are shown on depositors statements of account as at 19 January 2011 which are being sent to depositors.

Back to Top

14)  I am a customer and I believe I have a priority claim. Will I receive my money in full?

As a general principle, depositors do not have priority over other creditors and all creditors rank equally in accordance with Section 417 of The Companies (Guernsey) Law, 2008.  The determination of priority claims is a matter for the Commissioner and it has been determined that only a small number of creditors have a statutory priority.

Back to Top

15)  Will my bond be treated the same way as any other deposit? 

The answer is yes; all depositors will be treated equally as approved by the Court and the Commissioner.

Back to Top

16)  I have received the interim distribution from the Joint Liquidators using the required forms but what happens to the remaining 15 in pound of the amount I am owed?

The Joint Liquidators will continue their efforts to maximise cash realisations from the assets of LGL.

Back to Top

17) Why do I need to complete the depositor proof of debt form? 

Through the completion of the proof of debt form, depositors have assisted the Joint Liquidators in completing the adjudication process on their claims.

Those depositors who are yet to return their forms are requested to complete these forms as soon as possible.  As previously advised, no distributions can be made to those depositors who have not submitted their proof of debt form and should this form not be returned there is a risk that your claim against LGL may ultimately be rejected and assets reserved for your claim distributed amongst the remaining creditors of LGL.

Back to Top

PAYMENTS TO CREDITORS OTHER THAN DEPOSITORS
18) Will other creditors be treated the same as depositors? 

There are no statutory provisions in Guernsey for depositors to take priority over other creditors. As such non-depositor creditors are entitled to the interim distribution made by the Joint Liquidators.

Back to Top

19)  When will the creditors be paid? 

All creditor claims which have been adjudicated are entitled to receive either 85 pence in the pound or, in the case of preferential creditors, full settlement of their claim. This has resulted in payments of £0.6m being made to non-preferential creditors and £12,000 being made to preferential creditors.

Back to Top

DEPOSITOR COMPENSATION SCHEMES / GOVERNMENT SUPPORT
20) Will LGL be covered by the Depositor Compensation Scheme (“DCS”) in Guernsey? 

No. The DCS (which came into force on 26 November 2008) is based upon support being provided by the banking industry in Guernsey and is not retrospective.

Back to Top

21)  Are my deposits covered by the Icelandic or UK Depositor Compensation Schemes?

No, these schemes do not cover deposits of LGL’s depositors.

Back to Top

22)  Will the Icelandic Government, States of Guernsey, UK Government, IMF or the banking industry in Guernsey support LGL’s depositors?

There are no obligations on these bodies to support LGL.  The Joint Liquidators have discussed possible assistance from these bodies, however to date no assistance has been forthcoming.

Back to Top

LANDSBANKI ISLANDS HF / ICELAND
23) I have been following the discussions between HM Government in the UK and the Icelandic Government, particularly in respect of the outstanding loan to the parent and a parent company guarantee.  I would like to know whether LGL will be able to recover monies deposited with its parent, Landsbanki Islands hf and whether Landsbanki Islands hf will settle any shortfall outstanding to creditors to enable LGL’s obligations to be settled in full?

Under the Emergency Laws which were put into place in Iceland on 6 October 2008 (the day before LIHF went into Administration) to deal with the Icelandic banking crisis, domestic Icelandic depositors have had their deposits guaranteed in full through there transfer to “New Landsbanki”. Non-Icelandic deposits which are covered by the Icelandic deposit insurance scheme have been granted a priority over all other creditors of the Icelandic banks.

Landsbanki Guernsey’s deposit is classed as an interbank deposit under these laws and therefore is not covered by the Icelandic deposit insurance scheme.

On 15 September 2009 the Joint Administrators filed LGL’s claim against LIHF with the Winding Up Board in relation to the interbank deposit held with LIHF and also the guarantee provided from LIHF to creditors of Heritable Bank plc (Heritable”).
The Winding Up Board have published a list of their initial decisions in relation to the claims received by them. This showed that LGL’s claim in relation to the interbank deposit had been rejected although the Joint Administrators have recently been notified by the Winding Up Board that the claim has now been accepted as an ordinary claim.  The claim under the Heritable guarantee has also been accepted by the Winding Up Board in principle although no value has been attached to this claim on the basis that no loss has yet been suffered .
The Resolution Committee of Landsbanki Islands hf have indicated that they ultimately estimate to be able to repay preferential creditors approximately 83p in the pound with ordinary creditors receiving nothing.

The Joint Liquidators also note that individual claims by LGL’s depositors under the guarantee to LGL from LIHF have also been rejected.

Back to Top

24) Have the Joint Liquidators commenced legal action against the Icelandic Authorities as approved by the Court on 9 September 2009?

Yes.  LGL has lodged four individual claims in the winding up of LIHF including three claims in respect of deposit balances held by LGL with LIHF totalling £14.5m (collectively "the Deposit Claims"), a claim, in LGL's capacity as a depositor with Heritable Bank plc, pursuant to the guarantee provided by LIHF of deposit balances with Heritable Bank plc ("Heritable Guarantee Claim") (£34m) (this has now been sold with the Heritable debt (please refer to question 31); and each of these claims had also been claimed as a priority although these claims have now been withdrawn based on judgements handed down in similar cases.

The Winding Up Board has accepted LGL's Deposit Claims in full and the Heritable Guarantee Claim in principle.

A number of other creditors' claims (including depositors’ claims under the guarantee) have been referred to the Icelandic Court.  Where LGL has objected to these claims, that is, where the particular creditor is claiming priority pursuant to the amendments brought about by the Emergency Law, LGL is a party to these proceedings.

In addition to the above, the Joint Liquidators intend to lodge an alternative claim that the deposits should have been transferred to New Landsbanki rather than remaining in LIHF.

Should the Joint Liquidators be unsuccessful in these proceedings then they will consider commencing legal action against the Icelandic Government for damages caused as a result of the Emergency Laws.

Back to Top

25) Are the Joint Liquidators considering taking legal action against the Icelandic Government outside of Iceland?

The Joint Liquidators have had sight of advice that EU/EEA resident depositors may be able to take action against the Icelandic Government for contravening its obligations under the EEA Agreement in respect of the introduction of the Emergency Laws. The Joint Liquidators do not believe any action can be taken or funded by LGL as such an action could only benefit certain groups of depositors / creditors.

More information was provided in relation to this in the Joint Administrators Fourth  Interim Report which was mailed to all creditors in November 2010.

Back to Top

26)  Did the actions of HM Government in the UK in placing a Freezing Order over the assets of Landsbanki Islands hf result in a reduction in assets available to pay LGL’s depositors?

No, not directly as the Freezing Order did not apply to the UK assets of LGL or Heritable Bank.  The Joint Liquidators note that the freezing order has now been lifted.

Back to Top

27)  I have heard that Deloitte LLP (the UK firm) ("Deloitte") have been appointed to assist the Resolution Committee of Landsbanki Islands hf with the strategy for communication and consultation with the creditors, to provide assistance to the Icelandic financial regulator (“the FME”) in determining the value of the assets transferred to the “New bank” and to assist the Winding Up Board and Resolution Committee with their investigation into LIHF’s activities and financial matters.  Does this result in a conflict of interest for the Joint Administrators of LGL?

Deloitte gave full and careful consideration to these matters before accepting the appointments. They are fully satisfied there is no professional or commercial conflict of interest arising from their respective roles for LGL, Landsbanki Islands hf and the FME.
In line with other matters of this type, the circumstances of Deloitte’s role in Landsbanki Islands hf and the FME process are fully disclosed to the Commissioner and the Court.

Back to Top

HERITABLE BANK PLC (“HERITABLE”)
28) Why did Heritable in the UK go into Administration?
 

The Administration of Heritable is under the control of Ernst & Young.  Ernst & Young have issued a Statement of Proposals which can be obtained from Companies House, via the Companies House website, using the following link:

http://wck2.companieshouse.gov.uk/e5883ea42dafd3265bd3c30d53c0048e/wcprodorder?ft=1

Ernst & Young have also issued a number of reports to creditors which are available on the Heritable website at:

http://www.heritable.co.uk/aboutheritablebank/news/?NewsID=90&CatID=3

Back to Top

29)  I understand that the UK retail depositor book of Heritable was taken over by ING by a Statutory Instrument.  What are the prospects of such a solution for depositors of LGL?

The Statutory Instrument was effectively supported by full UK Government funding to enable ING to assume the liabilities of the retail depositors of Heritable.  This did not extend to interbank liabilities due to LGL and consequently there is no equivalent support for LGL depositors.  (Also see answers to questions 23 and 24).

Back to Top

30) Have the Administrators of Heritable provided any indication of the likely recovery for creditors of Heritable?

The Administrators of Heritable released a report on 28 January 2010 which included details of indicative recovery rates and payments to be made. Currently the Administrators expect that the base level of recovery will be between 79 pence and 85 pence in the pound with the stress case recovery between 63 pence and 73 pence in the pound.

A copy of the E&Y’s report dated 28 January 2010 on Heritable can be found at:

http://www.heritable.co.uk/Uploads/Documents/news/Heritable_Bank_Plc_Creditors_Update_2010.01.28.pdf

The Joint Liquidators sold the Heritable debt (including the guarantee of the debt by Landsbanki Islands hf) for 83p in the pound (32.90p net of 50.10p of dividends received to date).

Back to Top

31) Why did the Joint Liquidators sell LGL’s claim in Heritable Bank Plc? 

As creditors are aware, LGL had a £34million debt receivable from Heritable upon which £15.5m had been received to date.  On 6 January 2011 the Joint Liquidators agreed to sell the remaining debt for a gross price of 83p in the £, the net receipt being 32.90p/£ reflecting the fact that LGL has already received 50.10p/£ in distributions from the Heritable Administration.

The Joint Liquidators considered this trade very carefully and spent a considerable amount of effort over the last three months to achieve this price having failed to reach such a price in the latter part of 2010.  The debt was marketed by two separate brokers who are well known in the distressed debt markets and have been involved in recent transactions in Heritable debt.  The price achieved is above other recent transactions and is considered to be the best achievable price in the market.

It is not possible to share much of the detailed information which was considered in making the sale decision as it is confidential to the Joint Liquidators as members of the Heritable Creditors Committee, but permission was received for very detailed information of expected outcome of the Heritable Administrators to be shared with the ICC, who unanimously supported the sale decision at 83p.  The Joint Liquidators can however, make the following general explanations from their knowledge as creditors of Heritable.

  • The other depositors of Heritable are mainly local authorities and universities.  All retail depositors (such as those in Landsbanki Guernsey) were transferred to another bank with full protections from the UK authorities.  The time horizon for the remaining depositors is long and they prefer to maximise absolute recoveries no matter how long this takes.
  • The requirement of the Landsbanki depositors are mixed and many depositors would prefer to have cash sooner provided there is no significant extra financial loss caused by early realisation. 
  • The ICC, in the above respect, represents creditors as a whole, but are generally depositors who would prefer a longer timescale if this improves recovery.  As noted above, they have unanimously supported a sale at 83p on the basis of a balanced view of depositor preferences.
  • The position of Heritable was such that although 50.10p in £ in dividends had already been received the speed of returns has declined during 2010 as the more easily realised assets have been recovered and the remaining rump of assets were more challenging.
  • The Heritable assets include a structured property portfolio which is susceptible to the slowdown in house sales and vulnerable to falls in residential property prices.
  • The other significant asset portfolio is the residential mortgage portfolio which has a long run off life of over 15 years.
  • Market conditions for a sale of Heritable’s assets as a whole remain weak and to the Joint Liquidators’ knowledge there have been no offers for sale which would recover in the region of 83p to creditors.
  • Heritable’s expected (unstressed) recovery rate is between 79p and 85p and this is on a longer term work out basis.
  • The Joint Liquidators see no likelihood of a sale of Heritable’s asset as a whole in the current conditions which mean dividends from Heritable were expected to trickle through at least for the next year or so.
  • There are certain matters which could result in the Heritable recovery improving, just as Landsbanki Guernsey has with litigation in Iceland, but weighted against this is the time it would take and the risks of a further deterioration in asset values.

The Joint Liquidators believe that the sale as fair to the general body of creditors.  Only time will tell if the Heritable administration eventually achieves a better recovery, but there is always a price to be paid to eliminate risk.

Back to Top

DISPOSAL OF OTHER (NON LOAN) ASSETS HELD BY LGL
32) Have the Joint Liquidators disposed of any assets held by LGL to date? 

With regard to the lease on LGL’s former office, located at Carinthia House, 9-12 The Grange, St Peter Port, (“Carinthia House”) the Joint Administrators have agreed the assignment of the sub-lease.

New office equipment and furniture (owned by LIHF) installed at Carinthia House has also been sold to the new tenant. These proceeds have been set off against the amount due from LIHF as agreed with LIHF.

LGL’s computer servers previously held at ITEX (owned by LIHF) have also been sold and the proceeds have again been set off against the amount due from LIHF as agreed with LIHF.

Back to Top

PRE-ADMINISTRATION/LIQUIDATION ISSUES
33) I am a depositor and requested my monies to be withdrawn before the Administration on 7 October.  My request was either denied or not completed.  Why am I being treated as any other depositor?

Any depositors who were unable for any reason to withdraw their funds before the Administration will be treated equally with all other depositors based upon legal advice received and standard insolvency practice.  If the Joint Liquidators were to agree to such a withdrawal in full this would represent undue preference to the depositor in question over all other depositors. [The Commissioner has also agreed with the treatment applied by the Joint Liquidators/Administrators.]

Back to Top

34)  My deposit was in the process of being withdrawn and was stopped in the payment process following the appointment of the Administrators.  Is this legal?

Until payments have progressed through the payment process beyond LGL’s control the Joint Administrators were entitled and bound to stop such payments.  Any payment allowed in this situation would represent undue preference to the depositor in question over all other depositors.  All depositors will be treated equally.  At the Commissioner’s meeting on 19th January 2011, these claims for priority were provisionally rejected by the Joint Liquidators albeit sufficient funds have been reserved to meet these claims pending final adjudication.

Back to Top

35) Have the Joint Liquidators investigated the role of the GFSC in the events leading up to LGL being placed into Administration/Liquidation?

The Joint Liquidators have conducted their own investigation into the role of the GFSC and are satisfied that there was no bad faith by the GFSC in the events leading up to the Administration. The Joint Liquidators note that the GFSC’s actions in requiring LGL to restructure its balance sheet in April 2008 (which included the purchase of the loan portfolio from Heritable and moving funds to non-group banks) did provide significant additional protection for depositors. The Joint Liquidators also note that the Foot Report concluded that there was, on the part of GFSC, no “bad faith”, no “unreasonable actions” and no “regulatory failure”.

Back to Top

FURTHER PROGRESS UPDATES / ACTION GROUPS
36) What will happen now? Will I be provided with more information?

The Joint Liquidators will provide an update to depositors and other creditors as significant events unfold. Questions over routine depositor entitlement should be addressed through LGL’s normal client service numbers (+44 (0)1481 726885). Messages should be left on the answer machine and a member of the client service team will contact you to address your query.

Questions of entitlement to creditors should be addressed to the Joint Liquidators at P O Box 137, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3HW.

Back to Top

37)  Why can’t we have regular updates on all the activities of the Joint Liquidators? 

Updates will be provided when there are significant developments.  It is neither appropriate nor cost effective for the Joint Liquidators to respond to individual enquires concerning every development in the Liquidation.

Back to Top

38)  Are the Joint Liquidatorsa member of any of the Landsbanki action groups? 

The Joint Liquidators have been approached by a number of action groups proposing a jointly co-ordinated approach to maximising returns for depositors.

The Joint Liquidators can understand the reasoning behind such an approach and have given it full consideration; however, the Joint Liquidators are appointed by the Court and are therefore obliged to act under Court/Commissioner instructions and must be recognised as being fully independent of political and pressure / action groups.

In addition, an association with a particular action group may give rise to a risk that actions taken by such a group could jeopardise any ongoing negotiation or other realisation strategy being undertaken by the Joint Liquidators.

For the above reasons it is not possible for the Joint Liquidators to adopt a jointly co-ordinated approach but please be assured that the Court Order provides that a primary purpose of the Liquidation Order is to maximise realisations and the Joint Liquidators continue to do everything they can within the boundaries of the law to achieve this purpose.

The Joint Liquidators note the predominantly constructive efforts of the action groups.  Please also be aware that the Joint Liquidators take into consideration the blogs and comments appearing on various websites, together with all other relevant factors and information, when formulating the Administration strategy.

As noted in question 3, an Informal Creditors Committee (“ICC”) was formed as a result of a vote held at the Creditors meeting on 20 January 2009 in order to provide a forum for the Joint Administrators to discuss issues arising in the course of the Administration/Liquidation with creditors on a confidential basis.  The ICC has continued to have an active role in the Administration/Liquidation of LGL.

Back to Top

39)  Can you provide further communication by mail as I do not have access to the website?

Depositors who are unable to access the website at www.deloitte.com/uk/landsbankiguernsey can contact the Joint Liquidators in writing at PO Box 137, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3HW.  The Joint Liquidators will arrange for future significant updates to be mailed to the individuals concerned.

Back to Top

LGL is in Compulsory Liquidation and the affairs, business and property of LGL are being managed by the Joint Liquidators, Mr Rick Garrard and Mr Lee Manning of Deloitte LLP

Share this page

Email this Send to LinkedIn Send to Facebook Tweet this More sharing options
Follow:

Get in touch

More on Deloitte