The administrator to Lehman Brothers International (Europe), the London-based division of the collapsed US bank, has racked up more than £120m in fees in less than a year.
Big-four accountant PricewaterhouseCoopers (PwC) has had up to 300 people at any one time working on one of the most complicated administrations in corporate history. Joint administrator Tony Lomas, who was hired when LBIE's US parent failed last September, has predicted that the administration of the European arm could take more than a decade.
"So far, there has been £120-odd million in PwC fees, but it won't be continuing at this rate," Mr Lomas said. "This [intensive] level of activity should continue to the middle of next year." However, PwC's intention to speed up the administration was dealt a severe blow on Friday when Mr Justice Blackburne ruled that the High Court could not approve a scheme that would have simplified the distribution of assets to LBIE's former clients. These clients are owed $29.8bn (£18bn) in assets, such as shares in major corporations including BP, placed on their behalf by LBIE. PwC has already given back $13.1bn.
However, the ownership of many of the remaining assets is more difficult to establish. Under PwC's client assets scheme, a deadline of either the end of December or January would have been established for clients to make claims on the securities they own.
This would have meant that other parties could not claim on the same assets after the deadline. The idea was that this would lead to far fewer tortuous battles over ownership that would elongate the winding down of LBIE. However, the scheme hinged on modifying the rights of clients, including hedge funds and high-net-worth individuals, to reclassify them, in effect, as "creditors".
PwC applied to the High Court to sanction the scheme, only to be turned down because it did not have the jurisdiction to make a decision. Steven Pearson, one of the four joint administrators, said PwC has three weeks to decide whether to appeal. "I'm enormously disappointed," he said. "This will result in a further delay to the clients getting their assets back." However, he said, PwC would look at "disassembling" the scheme, which runs to 300 pages, and rewriting it.
Even if PwC makes a successful appeal, it will have to get the scheme voted through several different classes of clients. In each case, 75 per cent by value of stake and 50 per cent by number of parties would have to approve it.
If the scheme is not passed in some form, Mr Pearson warned, there could be up to 660,000 separate claims that would take years to wade through.