Manx Herald 09 May 09: Does the probable loss of parental guarantee mean KSFIOM SoA is a dead duck?

Fri, 08/05/2009

The Manx Herald shares the view of many DAG members that, regardless of the perceived value of the guarantee now, it would be stupid to write it off as worthless and to close off the opportunity, in the future, to be able to make a claim under the guarantee.

The Manx Herald has learned that urgent talks are being held, between members of the KSF (IOM) Depositors Action Group (DAG) and representatives of the Scheme of Arrangement (SoA) ‘promoters’, to establish whether the ‘parental guarantee’, from Kaupthing Bank Hf, will be preserved if the SoA is approved by voters and the courts.

The urgency has increased since a DAG delegation, who travelled to Iceland in the last few days, reported back that the view of the authorities there is that a SoA would be seen as a settlement; and would, therefore, release the bank from any obligation to make up any shortfall in payouts to KSF (IOM) depositors.

The Manx Herald understands that provisional liquidator, Mike Simpson, has asked his legal team to check on the position; but at the same time he has conveyed to DAG a view on the guarantee which has the clear inference that, even if it is preserved, it is probably of little value.

If this is true of either Mr Simpson’s opinion of the ‘value’ of the guarantee or its actual worth, then this should not only be of great concern to depositors in KSF (IOM) but also depositors in any other institution on the IOM relying on a ‘parental guarantee’.

In the case of the KSF (IOM) ‘parental guarantee’ an enormous amount of trust was placed on the ‘guarantee’; and it was ‘played on’ heavily by the company to attract business. It also has to be remembered the Financial Supervision Commission (FSC) set great store by it as well, as it is believed it was they who insisted on KSF (IOM) having it.

The Manx Herald shares the view of many DAG members that, regardless of the perceived value of the guarantee now, it would be stupid to write it off as worthless and to close off the opportunity, in the future, to be able to make a claim under the guarantee.

The Manx Herald believes every possible avenue should be left open to depositors to seek recovery of their money; and if the SoA looses them one or more avenue – without introducing any advantage to counter the loss – why would anybody want to support the SoA?

However, the Manx Herald is being contacted by a growing number of depositors who fear they will be excluded from voting as they will not have enough time to return the ‘original’ voting form and be eligible to register their vote. They describe this as unfair and unconstitutional.

Some have gone further and suggest the IOM Government is enjoying the plight and suffering caused by their incompetence; and that this accompanied by indifference to depositors caught up in this fiasco. Apparently at least 9 depositors have already died since October 2008 without having had their money back.

Meanwhile, FSC Chief Executive, John Aspden has again indicated he thinks the UK Financial Supervision Authority (FSA) should shoulder the blame for the predicament of KSF (IOM) depositors.

He told the Manx Herald had the FSA kept the FSC informed of the “deteriorating position” of KSF (UK) they could have managed the situation in a timely manner and there could have been a different outcome.

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