Depositors could receive quicker and higher recoveries of cash trapped in Kaupthing Singer & Friedlander Isle of Man (KSFIOM), according to information from the UK arm of the collapsed bank.
The improved prospect of returns from the UK arm of KSF could accelerate payments under the proposed Scheme of Arrangement (SOA) for Isle of Man depositors, enabling individuals with up to £50,000 frozen in KSFIOM to be paid in full within twelve months instead of 24, according to the Isle of Man Government.
Ernst & Young, administrators of KSF, says a possible overall recovery rate of at least 50% is now likely for creditors of the UK bank, according to an interim report released this week.
The Isle of Man Government expected a lower figure and has consequently moved its estimated minimum recovery rate for the local bank from 65% to about 75%.
Furthermore, the outlook for larger depositors also looks markedly better as higher dividends are expected.
The Isle of Man Treasury has agreed to defer its 'catch-up dividend' from 60p in the pound to 70p, which means it would get nothing back under the SOA until other creditors had received at least 70% of their claims.
Additionally, the SOA has been amended to reflect the latest information from the UK.
The revised SOA is expected to be available to depositors next week, ahead of their vote on the proposal on 19 May. If approved, the High Court will sanction the scheme on 27 May.
"A degree of clarity at last on recoveries that might be expected from KSF in the UK is indeed welcome," says Allan Bell, treasury minister, Isle of Man.
"The 50 per cent minimum indication is still low, which justifies our cautious approach, but it is better than working estimates so far. However, we note that this is dependent on the state of the UK economy."
An alternative to liquidation of the company and activation of the Island's Depositors Compensation Scheme, (DCS) the SOA is designed to provide assured scheduled repayments by funding from the Treasury, which has £180m in place to support the scheme.
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