High Court Judgment in Lehman Brothers Sub-Debt Priority Dispute

Following a two week hearing in November 2019 concerning the subordinated debt proceedings of LB Holdings Intermediate 2 Ltd (“LBHI2”) and Lehman Brothers Holdings plc (“PLC”), Mr Justice Smith handed down judgment in the High Court on 3 July 2020. Adrian Beltrami QC and Adam Kramer were instructed to advise and represent the Administrators of PLC in two heavily contested, multi-party “waterfall” disputes in relation to the distribution of surpluses within the Lehman estate, one in each of the above administrations, with an estimated value of US$1 bn.

Mr Justice Smith considered that (in relation to LBHI2’s estate) the subordination provisions meant that the Sub-Debt owed by LBHI2 to PLC ranked ahead of the Sub-Notes owed by LBHI2 to Lehman Brothers Holdings Scottish LP3. The Court concluded that the amendments to the Sub-Notes had changed their priority in this respect, and that Lehman Brothers Holdings Scottish LP3’s rectification arguments were not made out.

In PLC’s estate, Mr Justice Smith considered that its debts under the Sub-Debt to Lehman Brothers Holdings Inc and its debts under the Sub-Nots owed to LB GP No1 Limited ranked pari passu.

Adrian and Adam were instructed by John Tillman and Crispin Rapinet at Hogan Lovells.

Click here to read the judgment in full.