“This new information which we know has always formed the basis of the Treasury’s expectations shows that the cashflow and distribution proposals currently contained in the Scheme of Arrangement to be detrimental to depositors when compared with straight liquidation."

So says a press release issued by the Kaupthing Singer & Friedlander (IOM) Depositors Action Group (DAG).

They claim the Scheme of Arrangement (SoA) - sponsored by the Isle of Man Government (IOMG), to avoid placing one of the island’s banks into liquidation, thus triggering its much maligned Depositors Compensation Scheme (DCS) - appears to have hit a problem before it starts.

DAG go on to say the progress report from the Administrator of KSFUK – the unfortunate destination for over 50% of KSFIOM’s funds on the advice of the IOM Financial Supervision Commission (FSC) and the UK Financial Services Authority (FSA), with the backing of the directors of KSFIOM - reports that the current intention of the KSFUK Administrator is to pay a minimum of 50p in the £. This early estimate suggests that the Administrator is taking a conservative view and returns may well reach 60p which is the critical level for the current IOMG SoA proposals.

The IOMG and the Bank made it clear in court, on 9^th April, that if the distribution, from KSFUK to creditors of the Bank, were less than 60p there were advantages to creditors through the Scheme. With suggestions that the distribution may well exceed 60p it appears that the fundamentals of the proposed SoA make even less sense to KSFIOM depositors. Adoption of the Scheme, according to DAG, therefore, appears unlikely and any recommendation to the contrary from the IOMG may be dangerous.

With no reaction to this latest announcement forthcoming from the IOMG to give depositors a clear view of the situation, plans are proceeding for the DAG to open a number of international phone lines this coming Sunday to ensure that depositors are better informed regarding the value of their vote and the options open to them (see territories and numbers below).

This initiative is self-sponsored by the DAG, as apparently the Isle of Man ‘authorities’ have refused to offer an independent source of information for depositors who, it is claimed, have already suffered six months of stress and confusion. This state of play, in the opinion of DAG, looks set to continue.

A spokesman on behalf of the DAG says, “We always knew that the Isle of Man Government would go to any lengths to avoid liquidating a bank on the island and calling on its much trumpeted Depositors Compensation Scheme. It has spent the last six months and over £500,000 of taxpayers’ money devising a Scheme of Arrangement that does not satisfy anything other than its own political ambitions. Even at this stage the IOMG are more concerned with protecting themselves than with preserving the fundamental rights of those who entrusted their money to the island.”

They go on to say: “This new information which we know has always formed the basis of the Treasury’s expectations shows that the cashflow and distribution proposals currently contained in the Scheme of Arrangement to be detrimental to depositors when compared with straight liquidation. We still believe our legal rights are being removed, ensuring that the culpable parties in this financial disaster are never brought o account.

The DAG firmly believes that the time has finally come for the Isle of Man Government to fall into line with every other territory that was exposed by the demise of Kaupthing Bank and provide a prompt 100% return to depositors. With the likely returns over time projected at between 80-90%, this face saving exercise will cost the island little and offer much in terms of saving the Isle of Man’s reputation.”

The latest position statement from the Resolution Committee in Iceland remains the same, in that responsibility for deposits made at subsidiaries of Kaupthing Bank remain with that subsidiary and the jurisdiction in which they operated. A moratorium on repayments to creditors of Kaupthing Bank also remains in place; so it appears highly unlikely any funds will be forthcoming from that direction for many months, if at all.

However, it has been suggested in certain sections of the Icelandic media that a proposition was put together by Morgan Stanley, on behalf of the Resolution Committee, to return ‘New’ Kaupthing Bank to private ownership via a Danish bank. Certain advantages, for creditors of the bank and the Icelandic authorities, were mooted in the proposal; but it also said it would probably take some time to achieve and may not be progressed.

It is, however, interesting to note that the Icelandic authorities are keen to avoid a liquidation of the bank and appear to express a preference for a SoA of their own; which they say will prevent a reduction in the value of assets.

Therefore, the best hope for an improved outlook for KSF (IOM) depositors is the progress that seems to being made by the administrators of KSF (UK).

If they can return a minimum 50% of the £550m + deposited by KSF (IOM), in a fairly short timescale, then the Manx Herald thinks it should be possible to offer KSF (IOM) depositors a much better deal than the one which is currently on the table.

For further information go to www.ksfiomdepositors.org

PHONE LINES WILL OPEN 26/04/2009 these are for depositors only

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