Barings creditors to get limited payouts

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The Independent Online
CREDITORS of Barings, which collapsed in 1995 after Nick Leeson ran up debts of more than pounds 800m, could receive pay-outs later this month.

Ernst & Young, the bank's liquidator, yesterday outlined terms of the proposals, which should result in a pay-out of pounds 190m to Barings' bondholders.

Alan Bloom, national head of corporate recovery at Ernst & Young, called the proposals "a major step forward". He added: "Agreement with the creditors by the summer would be very pleasing."

Three classes of bondholders lent Barings a total of pounds 275m between 1986 and 1994. Investors included major life and pension funds and Downside, Britain's oldest Roman Catholic public school.

However, under the proposals put forward yesterday, not all bondholders will be fully recompensed.

Those investors who bought Barings' floated rate notes in 1994 [the 1994 notes] stand to gain most. These bondholders lent the bank a total of $150m (pounds 90.1m), and will be repaid their initial investment in full, with interest.

George Seligman, a partner in Slaughter & May and an adviser to Ernst & Young, said: "Holders of the 1994 notes will be delighted with this."

Holders of 1986 notes will receive $59 per $100 invested. Holders of 1994 perpetuals will receive pounds 24 per pounds 100 invested.

Jonathan Stone, who heads a pressure group representing holders of 1994 perpetuals, called the settlement "disappointing", saying he would have liked to see bondholders being fully recompensed. But Mr Stone said he expected the bondholders to accept the plan. "Something is better than nothing", he said.

Mr Seligman, of Slaughter & May, explained that the 1986 notes were issued on less favourable terms than the 1994 notes.

From a credit perspective, 1994 perpetuals rated lower than both the 1986 notes and the 1994 notes, he added.

However, Mr Seligman said the bargaining position of holders of the 1994 perpetuals had been strengthened by the threat of legal action.

These bondholders, led by Mr Stone, had issued a writ against Barings and some of its former directors.