Liquidator to get 75pc of Lehman fees in advance
Lehman Brothers' liquidator won court approval yesterday to get advance payment of 75 per cent of the HK$291 million in fees it has charged for dismantling the collapsed investment bank's Hong Kong operations - a bill described as 'ridiculous' by one lawmaker.
Mr Justice Aarif Barma granted the request from accounting giant KPMG, saying the 'exceptional circumstances' of Lehman's insolvency justified going above the usual two-thirds paid to liquidators before a winding-up had finished. He had 'no doubt at all' that this was an exceptional case, he told the Court of First Instance hearing.
The HK$291 million bill could be cut if an assessor deemed it too large, Mr Justice Barma said. KPMG had asked for 80 per cent of the expenses it had racked up for the seven months ended in March. The bill included fees charged by law firms working with KPMG - O'Melveny & Myers, Linklaters and Mayer Brown JSM.
The liquidation of eight Lehman Brothers units in Hong Kong was a reflection of the 'staggering' size and complexity of other Lehman liquidation proceedings, barrister Joseph Fok SC told the hearing yesterday.
With more than 900 staff in Hong Kong, a HK$75 million monthly payroll and thousands of unsettled trades - including 11,000 futures contracts - the liquidation had been 'enormous', Mr Fok said. KPMG's fees were also just a fraction of the Lehman subsidiaries' HK$349 billion in assets and liabilities, according to an affidavit from KPMG's head of restructuring, Edward Middleton.
'These insolvencies are without parallel,' Mr Fok said. 'This is not an affidavit based on hyperbole.'
But Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, a group dedicated to money lost by investors when the US-based investment bank collapsed last September, called the fees 'outrageous'. 'Any investor involved in the Lehman Brothers saga will feel very angry about those figures' he said.
Democrat lawmaker Kam Nai-wai called the liquidators' expenses 'ridiculous' and said he would talk to aggrieved investors before raising his concerns in the Legislative Council.
A senior professional involved in Lehman's Hong Kong insolvency said: 'This is an unprecedented insolvency, probably the most complex the world has ever seen. All the work we are doing is to maximise returns of cash to creditors.'
Some firms were concerned about their working capital because they had not been paid for their work, said the source, who asked not to be named. The fees averaged HK$3,300 an hour, less than the HK$4,500 and HK$3,700 for parallel Lehman liquidation proceedings in Europe and the US, the source said. Creditors of the Hong Kong operation, about 2,000 in all, were expected to get some of their money back, KPMG has said.
Meanwhile, investor Li Wai-chung filed a lawsuit this week against Standard Chartered Bank over allegations that he was sold HK$500,000 worth of Lehman minibonds. About 48,000 Hongkongers lost most of the HK$20 billion they invested in credit-linked derivatives, such as minibonds, issued or guaranteed by Lehman Brothers.
