Administrators of Lehman Brothers International (Europe) at PricewaterhouseCoopers had a High Court ruling throw out their proposed scheme of arrangement for the collapsed bank.

PwC proposed a scheme of arrangement which sought to modify certain rights of clients who have assets held on trust by LBIE. Specifically the firms proposed a scheme of arrangement to distribute $14bn (£8.4bn) to clients, mostly hedge funds, who held funds at Lehman.The funds opposed PwC’s plan because the proposal included a clause that said the money Lehman held in custody on behalf of the hedge funds should help pay for the administration costs, including fees for PwC (PwC has already received £120m), the lawyers in charge and up to 500 staff that Lehman still employs.

But the judge ruled that the court has no jurisdiction to sanction a scheme ‘which modifies affected clients in this manner’.

UK judge Justice William Blackburne said in a ruling that the court did not have jurisdiction to force creditors who did not agree with PwC’s proposal, to accept the arrangement.

Rethink…

“We will most likely appeal,” said PwC partner Tony Lomas. “We are also considering ways in which the plans could be modified to deal with the observations that have been made.

See the Guardian for more.