Court gives go-ahead for development of KSF IOM Scheme of Arrangement

THE High Court in Douglas yesterday (Thursday February 19, 2009) gave the go-ahead for the Treasury to continue developing a Scheme of Arrangement (SOA) for depositors with Kaupthing Singer & Friedlander Isle of Man.

The SOA, an alternative to liquidation of the company and activation of the Island’s Depositors Compensation Scheme, will provide assured scheduled repayments underpinned by funding from the Treasury, which will leave its support in place until all other creditors have recovered at least 60 pence in the £.

It is estimated that the SOA, which will be subject to Court and creditor approval, will see 54 per cent of eligible depositors receive 100 per cent of their money back within three months of the scheme being signed, with 71 per cent repaid in full within two years.

Treasury Minister Allan Bell MHK commented:

‘The Isle of Man Government is encouraged that the Court has seen the benefit for depositors and will proceed quickly. We have been working on the Scheme of Arrangement since the previous adjournment of the case so we have not lost any time and believe we could start payments by July/August.

‘Also this week Tynwald has approved a second and increased Early Payment Scheme (EPS) of up to £10,000 per eligible account holder with KSF IOM, and these payments will begin in about a month from now to ease any immediate hardship cases.’

The Court, which adjourned the matter until April 9 for the presentation of a Scheme of Arrangement, heard expert legal evidence that creditors’ rights – to sue third parties for example – could be preserved in such a scheme.

The second Early Payment Scheme, meanwhile, will be financed from Isle of Man Government reserves up to a total of £94 million. It follows the first such scheme, providing up to £1,000 per account holder, approved at the January Tynwald at a total cost of up to £11 million.

Moving the second EPS in Tynwald Mr Bell said that it had been developed along similar guidelines and eligibility criteria to the first scheme.

However, he pointed out that in the second scheme the treatment of insurance bondholder accounts was simplified with all accounts now qualifying for a maximum single payment of £10,000 irrespective of the number of joint or multiple beneficiaries to which that account related.

The Minister told Tynwald that as with the first scheme, depositors would be required to make a claim for the enhanced early payment whilst the Scheme of Arrangement is finalised. The EPS was a voluntary arrangement and would not affect the depositors’ entitlement to benefit under the Scheme of Arrangement once approved.

As before, the claimant for early payment would be required to execute a memorandum of assignment in favour of the Treasury in respect of the sum received so as to enable the Treasury to subsequently receive that amount from any other sources of distribution that become available to depositors.

Information on the second early payment scheme and the documentation which must be completed to make a claim will be sent out to depositors in the week commencing 23 February 2009.

Details of the second scheme will be posted on the Isle of Man Government website (www.gov.im) and the Financial Supervision website (www.fsc.gov.im) on 23 February 2009. Further information on the second Early Payment Scheme can be obtained by contacting the KSF telephone helpline +44 (0)1624 685858 or by emailing: ksfdepositors@gov.im.