The creditors of collapsed margin lender Lift Capital would see an estimated return of 65 cents in the dollar under a proposed resolution struck between Lift’s secured creditor and lender Merrill Lynch, and Lift’s liquidators McGrathNicol.
Under the proposed resolution, Merrill Lynch would add $10.3 million cash to the $46 million pool of funds currently waiting to be returned to creditors by the liquidators, McGrathNicol said.
Additionally, another $2 million would be added to the pool in the future after liquidators recover outstanding client loans. But $3 million would be subtracted from the pool due to future operational expenses, making total funds available for distribution to creditors of $55 million.
Merrill Lynch and the Lift client with the largest claim, valued at between $32 million and $38 million plus consequential losses, will not prove in the scheme under the proposed resolution, McGrathNicol said.
Additionally, Merrill Lynch would transfer $25 million worth of surplus securities that it holds to stockbrokers nominated by McGrathNicol for the purpose of returning them to Lift clients and others with claims to the securities.
The surplus securities would not be available to Lift clients until the proposed resolution is finalised, but arrangements could be made to sell securities with the proceeds held in escrow, McGrathNicol said.
The estimated return of 65 cents in the dollar under the proposed resolution is 66 per cent higher than the estimated 39 cents in the dollar if Lift was to completely liquidate.
The estimated return under the proposed resolution also depends on a number of other assumptions, Lift said. The proposed resolution must be approved by a number of creditors, expected in December, and then the courts, expected early next year.
Creditors have collectively claimed $84 million from Lift. The margin lender entered voluntary administration in April with debts of $650 million.
The proposed resolution comes after mediation was held between the liquidators, a Lift client who is also a member of the creditors’ committee of inspection, and Merrill Lynch between 28 and 30 July 2009.
The mediation ended without an agreed proposal for resolution of claims between Lift, Lift clients and Merrill Lynch.
