Payout for BCCI creditors by January: Liquidators' deal with Abu Dhabi guarantees at least 40p in the pound

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MORE than 45,000 British creditors of the disgraced Bank of Credit and Commerce International will start to receive compensation payments of at least 40p in the pound by the turn of the year as part of a dollars 1.8bn deal signed by the bank's majority shareholder, Abu Dhabi, and BCCI's liquidators last week.

The news ends three years of uncertainty since the bank was closed by regulators after massive frauds which led to more than dollars 10bn of losses. Until now British creditors have only received payments under the Bank of England's Depositors Protection Fund, with a maximum of pounds 15,000.

The deal is substantially better than the dollars 1.7bn compensation package originally offered by Abu Dhabi, which was rejected by the Luxembourg courts last October.

That proposal offered 30p-40p and was fixed. This new deal offers at least 40p, possibly more depending on the liquidators' success in securing more assets.

As well as increasing its payout the emirate, which owns 77 per cent of BCCI, has given up its claim for half of all future BCCI money recovered by the bank's liquidators, Touche Ross, a key plank of the original compensation agreement. The Luxembourg court ruled this condition unfair.

More than half a million creditors worldwide will start to receive payments by next spring at the latest. They will be in two stages. Abu Dhabi is paying dollars 1.55m to the liquidators up front and another dollars 250m in an escrow account, to be paid over three years.

The 40 per cent payout could eventually increase, depending on the success of dollars 1bn worth of court actions underaken by the liquidators. Touche Ross have also tracked down roughly dollars 1bn of BCCI's assets which will go towards the compensation plan.

The agreement signed between Touche and Abu Dhabi will allow all BCCI's remaining assets and liabilities to be pooled worldwide, avoiding the danger of legal disputes over rival claims. The liquidators have agreed not to sue Abu Dhabi and vice versa.

Abu Dhabi also gives up a claim for dollars 2.2bn of funds it allowed BCCI to manage on its behalf.

The deal must now be approved by BCCI's creditors' committee and courts in the three countries from which the bank was regulated - the UK, the Cayman Islands and Luxembourg.

The cost of winding up BCCI has shocked creditors and politicians. The liquidators' fees including legal costs reached pounds 130m last October, and at one stage costs were running at dollars 1m a week.