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UK Pensions Regulator reveals reasons for going after Lehman Brothers

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  • UK Pensions Regulator reveals reasons for going after Lehman Brothers

UK - The UK Pensions Regulator's determination panel has revealed the reasons behind decisions to pursue Lehman Brothers' parent company for financial support for the investment bank's insolvent pension scheme.

When Lehman Brothers Holding Inc (LBHI), the US parent company, filed for bankruptcy two years ago, it left the UK Lehman Brothers Pension Scheme heading toward the Pension Protection Fund (PPF) with a funding black hole of £148m (€170m).

The pensions watchdog has since issued LBHI, three main operating companies within the UK and two intermediate UK holding companies with a Financial Support Direction (FSD) forcing them to credit the pension scheme since they had benefited from Lehman Brothers profits before its collapse.

June Mulroy, executive director for delivery at the regulator, said: "This is an important first step, and we will vigorously support the trustees as they pursue the liability owed to the pension scheme in the various insolvency processes.

"The FSD will give them a voice in those proceedings."

The determinations panel found the US parent had not only been in receipt of the investment bank's revenue, it has benefited from the provision of staff.

What is more, LBHI, as group treasurer, was essentially the sponsor and guarantor of liabilities to the pension scheme.

However, irrespective of the regulator's view, members of the Lehmans pension scheme can expect to endure a lengthy and complex legal battle as LBHI holdings rejects the findings.

According to Lesley Browning, partner at law firm Norton Rose, the regulator will have to prove the pensions deficit was apparent at the time LBHI filed for insolvency.

Browning said: "The hurdle TPR may face is that the FSDs create a liability after the point of insolvency, and thus they may not be considered as existing at the commencement of insolvency.

"The sums sought are not even recoverable as contingent debts as, again, there is a question over whether any liability existed at the outset of the insolvency proceedings."

LBHI is expected to have its day in court in November in a joint action filed with Nortel, which is also in receipt of FSDs for recovery of pension debt.


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  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

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