CHP 11/0097 - Foundations Program Plc (in liquidation) ("FPP")
CHP 11/0098 - FPA Limited (in liquidation) ("FPA")
Update 24 November 2015
Glossary
Foundations Program plc - in liquidation ("FPP")
FPA Limited - in liquidation ("FPA")
Joint Liquidators and Joint Official Receivers ("JL&JORs")
Note for Participants and Loan Note Holders (LNHs) and other creditors of FPP & FPA
Update and general explanation of JL&JORs next steps relevant to the liquidations of FPA and FPP
Policy redemptions
The JL&JORs have continued with their efforts to progress with the life policy redemption process and have been closely monitoring the outstanding policy redemptions. The current position is as follows:
| Policies redeemed | 135 | 65% |
| Policies suspended | 26 | 12% |
| Policies outstanding | 42 | 20% |
| Assignments in dispute | 5 | 3% |
| Total | 208 | 100% |
The number of policies that are suspended is, of course, disappointing. Suspension means that the assets held within the policies are not capable of being realised. This usually indicates that the investment fund concerned is illiquid and value cannot be extracted. This does not automatically mean that the value of these policies is zero, however there is a real risk that this is the case.
There are several reasons why the remaining policies are outstanding or in dispute:
| FATCA | FATCA is US legislation and stands for Foreign Account Tax Compliance Act. It affects financial institutions throughout the world. A number of policy redemptions have been required to file FATCA information. The JL&JORs believe that the request is wrong we are currently attempting to resolve the matter. |
| Second signatures | A number of companies are seeking second signatures on the redemption documentation. There are no such second signatories and the JL&JORs are, again, seeking resolution. |
| FPA submissions | A number of redemptions could not be completed because of a number of miscellaneous issues affecting FPA and the assignment process. In order to resolve the issues, the policies had to be re-assigned by the bank to FPA. FPA has since re-submitted the redemptions and the JL&JORs are actively progressing resolution directly. This process may require proceedings to be issued and a determination by the Court. |
As a result of this profile, and the uncertainty as regards the total value that can be extracted from the policies, the JL&JORs have re-assessed their plans for an interim distribution. However, the JL&JORs will continue to progress the process of issuing an interim payment as soon as possible. There are a number of steps that must be taken and these are addressed separately in this update.
Points calculations
Participants will recall that the reconstruction of the points values for their policies is an essential part in the allocation of Program losses. The reconstruction process has been dependent upon the provision of historic data by the life companies and has taken considerable time to complete due to the lack of data available to the JL&JORs. The investments also had to be reviewed to ensure that the appropriate discount factors had been applied in accordance with the term of the Program. The JL&JORs have completed their recalculations. Over the course of the next few weeks, along with other documents that will be described later in this update, Participants will be sent a copy of their points statement. The statement will also set out a deadline by which challenges to any of the calculations based on evidence or submissions must be provided.
Other recovery actions
All the necessary documents commencing proceedings against three directors have been served. In accordance with the timetable set by the Court, two of the directors have filed their defence documents. One director has sought a further time extension to file his defence due to ill health. The hearing to determine the timetable for the further required filings is in early December. The JL&JORs currently anticipate that the rest of the formal case filings will take place in the early part of 2016.
Basis of interim distribution
An interim payment will be made from the amount available for distribution calculated as follows:
| USD | ||
| Total funds held by liquidator | 9,000,000 | |
| Payable to external creditors (Program creditors) – note 1 | 2,100,000 | |
| Retentions for legal costs, future liquidation expenses | 1,500,000 | |
| Available for distribution - note 2 | 5,400,000 |
Notes
1 – The creditors figure include all claims, a number of which the JL&JORs are disputing. For these purposes it is assumed that the creditors’ claims are valid.
2 – This amount does not take into account the sums sought from the directors.
Interim distribution - re Participants
NB - No action is necessary until the JL&JORs send you an individual email or letter setting out the requirements. The JL&JORs will update this website when emails and letters have been dispatched
As noted above, you will receive a statement of the points calculations as indicated above, which will also indicate the Participant’s share of current estimation of the Program losses. The JL&JORs will also give an indication of the effect of the assignments in dispute on the basis that the claims are unsuccessful or if they are successful. Participants will also need to bear in mind that their percentage of loss is not final. As indicated, based on any evidence or submission provided within the deadline set, the JL&JORs will consider challenges to the points calculations which will have a corresponding impact across all participants.
Participants will be also provided with an estimate of the interim distribution and the basis upon which it has been calculated.
IMPORTANT – PLEASE NOTE THAT EACH PARTICIPANT’S CIRCUMSTANCES ARE DIFFERENT. DEPENDING UPON THOSE CIRCUMSTANCES THERE WILL BE SOME PARTICIPANTS WHO ARE NOT ELIGIBLE FOR A PAYMENT. THIS WILL ARISE IF THEIR SHARE OF THE PROGRAM LOSSES EXCEEDS THEIR SHARE OF THE ASSETS ("SHORTFALL"). THE JL&JORs MAY SEEK RECOVERY OF ANY SHORTFALL FROM THE RELEVANT PARTICIPANT.
The JL&JORs will be inviting Participants to check their records where the life policies were paid by regular premiums. Any premiums paid between 23 November 2011 and the date of redemption may be recovered by the Participants from the JL&JORs. Proof of payment of premiums will be required.
The JL&JORs will also seek bank details to enable the interim payment to be paid in due course. The basic payment will be made in USD. If you require a different currency, please note that the spot rate will be used at the time of payment. All transfer charges will be borne by the recipients.
Interim distribution - re Loan Note Holders
NB - No action is necessary until the JL&JORs send you an individual email or letter setting out the requirements. The JL&JORs will update this website when emails and letters have been dispatched
Loan Note Holders will receive details of the value of the note in USD. Loan Note Interest up to 22 November 2011 will be added (up to a maximum rate permitted by the Isle of Man statues being 5% pa).
The JL&JORs will also seek bank details to enable the interim payment to be paid in due course. The basic payment will be made in USD. If you require a different currency, please note that the spot rate will be used at the time of payment. All transfer charges will be borne by the recipients.
Summary
Neither Participants nor Loan Note Holders need to take any actions yet. You will be contacted by email or letter depending upon the contact details we have for you. For those who have formally appointed legal advisers, the communication will be with those lawyers.
As the JL&JORs settle the basis for the distribution it may be necessary to seek the sanction of the Court.
As indicated above the JL&JORs will publish a notice on this web-site when all the communications have been issued. Only at this point should you consider contacting the JL&JORs if you have not received anything. Until that time please do not contact the JL&JORs seeking individual details. These will not be issued over the telephone and cannot be issued before the details are ready to send out to all the parties.
24 November 2015