Lawyers acting for Barings investors are squaring up for a High Court battle over the future ownership of $150 million of assets in Barings BV, the Dutch wholly-owned Barings plc subsidiary.
Two groups of Barings institutional creditors holding $150 million of guaranteed floating rate capital notes apiece have competing claims on the BBV assets.
One group, with notes issued in 1986 (the '86 Notes), is going to court to seek a half share of the BBV assets in the event of liquidation. Denton Hall represents the group.
However, the other group, with notes issued in 1994 (the '94 Notes), believes it has a just claim to all of the BBV assets. Clifford Chance is acting on behalf of this group.
The '94 Notes group has applied to Dutch and English courts for a winding up petition of BBV to claim the $150 million plus interest and costs.
“It's a straight fight between the '86 and '94 Noteholders,” says a source.
The '86 Notes faces a difficulty in that its contract contains a 'flip clause' which, in the event of liquidation, 'novates' all its claims to the Barings plc holding company. Barings plc is already in liquidation and is unlikely to have any assets left for noteholders.
Andrew Wilkinson, of Clifford Chance, says: “The '94 steering committee is confident that it has an extremely strong case. It is looking forward to a speedy vindication of its rights, and the liquidation of BBV.”
The '94 Notes winding up petition is on hold until the courts determine the validity of the '86 Notes' flip clause. The '86 Notes are to contest that validity when the case comes to the High Court on 30 October. They say there is no flip clause provision in the trust deed, and although one appears in the deed annex it is unintentional.
Law Debenture Trust acts as trustee for both Notes groups and is party to the action. Theodore Goddard and Linklaters & Paines act for Law Debenture for the '86 and '94 Notes respectively.
Meanwhile the Barings Perpetual Noteholders Action Group (BPNAG), the third group which holds notes in Barings plc, is considering its chances following the report by the Board of Banking Supervision into the bank's collapse.
Jonathan Stone, BPNAG chair and SJ Berwin consultant, says: “We want proper answers to legitimate questions. After that, we will take legal advice to establish whether we have grounds for action.” This could be against any of the following: the Bank of England, Stock Exchange, the three outside issuers of the notes – namely BZW, Cazenove & Co, ABN AMRO Hoare Govett Group, and the management of the failed Barings companies.
“We are encouraged by the various dismissals and resignations that have taken place… [and believe] that we will have grounds for launching successful litigation,” he says.