Vol 15 (2018) - Issue 6

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When the Waterfalls Dried Up: The Lehman Scheme

Synopsis
In his judgment sanctioning the scheme of arrangement proposed by LBIE to, among other things, bring an end to the long-running Lehman waterfall litigation and enable the payment of statutory interest, Hildyard J provided an excellent and thoughtful summary of the key legal issues and tests to be considered at both convening and sanctioning stages of a scheme.

Introduction
On 15 June 2018 the High Court sanctioned a scheme of arrangement proposed by Lehman Brothers International (Europe) ('LBIE') (in administration). The scheme was designed to bring to an end the outstanding 'waterfall' and other surplus fund litigation in relation to LBIE that had been running since 2015, provide a mechanism for the payment of statutory interest to creditors and facilitate the wind down of an administration that has now been running for over 10 years. Without the scheme, statutory interest could not have been paid for a number of years due to the ongoing litigation preventing the administrators from distributing the surplus. Hildyard J handed down a detailed judgment following his sanctioning of the scheme, addressing a number of issues relevant at both the convening and sanction hearing stages.