The High Court in London handed down judgment on Part C of the Lehman Waterfall II Application on 5 October 2016.

The judgment examines the extent of creditors’ entitlements to Default Rate interest on debts arising under ISDA Master Agreements governed by English law and New York law. As some £4.4 billion of LBIE’s admitted claims arise under ISDA Master Agreements and the debts were outstanding for more than five years, this judgment will materially influence the amount of money which must be applied in satisfaction of creditors’ entitlements to statutory interest.

When a loan is secured by real property, the current value of the property will be a determining factor in how the lender is treated in bankruptcy and will drive the lender’s bidding strategy in foreclosure. Valuing real property has never been an exact science. Volatility in the residential and commercial real estate markets over the last two years has made it even harder for lenders to rely with confidence on the appraisals they obtain to plan and predict how they will fare in bankruptcy or in foreclosure.