Hearings before courts in London, Luxembourg and the Cayman Islands in the next six weeks should finalise the liquidation agreement for the Bank of Credit & Commerce International (BCCI), which was closed in most international centres in the summer of 1991 (MEED 2:8:91, Cover Story).
A statement released by the liquidators at the end of November says that this could clear the way for the first payments to an estimated 150,000 creditors to take place during 1995.
The chances that the courts will approve the agreement have been increased by the fact that it has ‘received overwhelming support’ from creditors’ committees in the UK, Luxembourg and the Cayman Islands, a spokesman for the liquidator Touche Ross says. The three committees comprise six or seven creditors each.
The courts also have the power to approve the agreement without further reference to the opinion of creditors in general. A previous attempt to secure legal approval for an agreement was blocked by the courts which demanded that the views of creditors should be tested. However, any creditors wishing to object to the new agreement have the right to appear at the hearing and this could be taken into account by the courts.
Members of the creditors’ committees say the new settlement is a major improvement on the original agreement in several respects:
The majority shareholders are to pay a fixed $1,800 million into the settlement. The previous settlement called for $1,200 million-2,200 million to be paid in and stipulated that the majority shareholders’ contribution would fall as realisations in the liquidation rose.
Creditors are not required to sign away their rights to sue the majority shareholders in the future.
The deal also calls for BCCI branches in the UAE, now incorporated within the Union National Bank of Abu Dhabi, to be pooled with the liquidation. The original agreement called for the assets and liabilities of these branches to be separately treated. This would have meant creditors to the UAE branches, the only functioning element of the BCCI group, would have received a different pay-out to creditors in the general settlement.
The Luxembourg and UK hearings are due before the end of 1994 and the Cayman Islands’ hearing is in January. If the courts approve the settlement, Touche Ross will proceed with calculating the final total dividend due to creditors. This will be issued in one or more interim payments before a final dividend is declared. The first interim dividend is expected next year.
Creditors say that there is still no final confirmation of the total amount that will be available or a definitive list of creditors. However, some estimate that creditors will receive 30-40 per cent of the amounts owed to them. Others hope the pay-out will be much higher.
The settlement will also clear the way for Union National Bank to recapitalise itself, appoint a new board of directors and issue full financial details (see UAE).
Attention is now switching to litigation being pursued against individuals and institutions involved in BCCI in the years leading up to its closure.
A report in the London daily Financial Times on 22 November said that Touche Ross was on the verge of reaching a $245 million (£149 million) out-of-court settlement with The National Commercial Bank (NCB) of Saudi Arabia and its former chief operating officer Khaled Bin Mahfouz (Banking, MEED Special Report, 30 September 1994, page 34).
This is to be paid in cash in return for which Bin Mahfouz and the bank would waive its own claims against BCCI. The liquidators would in turn drop all further charges. Touche Ross and creditor committees spokespeople declined to comment on the report.