LG SP INVESTMENTS LIMITED (IN LIQUIDATION)

LG SP INVESTMENTS LIMITED (IN LIQUIDATION)
Correspondence Address: Unit 33K, First Floor, Snugborough Trading Estate,
Union Mills, Isle of Man, IM4 4LH
On 21 January 2013 the High Court of Justice of the Isle of Man made a Winding Up Order placing LG SP
Investments Limited into liquidation. Michael Simpson and Gordon Wilson were appointed as Joint Liquidators
and Joint Deemed Official Receivers.
Our Ref:
3rd November 2014
Dear Sir / Madam
Property Investment & Cessation of Securities (“PICS”)
Introduction
We refer to our appointment as Joint Liquidators and Joint Deemed Official Receivers LG SP Investments
Limited (in liquidation) (“LGSPI”) and write to you as you have made a claim against LGSPI as a result of an
investment in a Property Investment & Cession of Securities Agreement also known as a “PICS” agreement.
We described the current position of the Louis Group winding up in our recent report and if you have not seen
it, then it is available at the following link:
http://www.pwc.com/im/en/services/advisory/insolvency-louisgroup.jhtml.
We refer you to section 7 covering compromise and PICS claims and appendix 12, LGSPI’s financial summary.
We use the same defined terms here as were used in that report.
Our Findings
Our work as LGSPI liquidators has been hampered by its financial situation. Simply there is no money to pay
the costs of our work and from what we have been able to ascertain to date, the financial records are
materially incorrect and probably false.
We’ve received over 130 claims against LGSPI totalling in excess of £80m claims by value, 22 of which are from
PICS claimants totalling circa £2.5m by value. For the majority of these PICS claims, we are minded to deem
them valid claims based on a combination of signed agreements and cash flow. However as LGSPI currently has
no money, even if they are valid, there is unlikely to be any recovery.
Having reviewed various PICS agreements, we think that the intention behind them was to give you, the PICS
investor, a security in an underlying investment in the event of a default by LGSPI. The majority of PICS
agreements, as far as we can tell, contain references to security over shares in Louis Group Structured Fund
PLC (“LGSF”), however we are advised that there may be difficulties in enforcing it.
We’ve established that LGSPI owns shares in LGSF, however these shares are now of doubtful value.
LG SP Investments Limited (In Liquidation),
Registered in the British Virgin Islands No. 1032235
Registered Office: Palm Grove House, PO Box 438, Road Town, Tortola, British Virgin Islands
Tel: + 44 (0) 1624 649200
We’ve found that your money, invested into LGSPI via PICS, was mixed with other money from a variety of
other sources in what we believe was unlicensed deposit taking activity. We’ve also found that the amounts
that LGSPI paid to the LGSF, in return for shares, were paid by LGSF on to LGSC and from there back to LGSPI.
In effect the money went round in a circle.
Our aim is to break that circle so that some money can be repaid to those affected, including yourselves. To
help us achieve this, we are writing to you now to ask you to agree to a PICS specific compromise.
Proposed Compromise
As we noted above, LGSPI currently has no money therefore unless there is compromise, you will most likely
not receive any return on your claims.
In terms of your security, the PICS agreements appear to give you a right to demand that a number of LGSPI’s
shares in LGSF are ‘ceded’ to you now that LGSPI has defaulted on your debts. As yet, none of you have made
any such demands, however as LGSF is in liquidation, transfers of its shares can only occur with permission of
the court.
Whilst you could consider making the necessary court applications, unless there is compromise, LGSF shares
are probably worthless so there would seem little commercial point to you doing this.
Our proposal involves transferring assets and compromising the liabilities of various companies into a new
pooled vehicle to save costs and help us to get money back to you quicker and with greater certainty. We
explained what this might mean and why we think it is necessary in our recent report.
Valuing your claims against LGSPI
When we have reviewed proof of debt forms against LGSPI in respect to PICS we have noted that there are
differences in the way claimed amounts have been calculated. Some have claimed repayment of the initial
investment only, (i.e. no interest), whereas others have claimed interest at the rate in the agreement.
To achieve a fair and consistent approach, we have recalculated claimed amounts using the following
methodology and we propose to use these recalculated amounts for the purposes of valuing your claim. We
have:
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used the investment amount per your agreement;
used the interest rate defined in each agreement or an average where there is no defined rate;
applied interest at the contract rate up to the date of liquidation – 21 January 2013;
not calculated penalty interest;
deducted any previous interest or capital repayments which we have identified.
In addition, we have noted a number of concerns in the records relating to PICS agreements, including;
variation in the underlying investment, missing agreements and instances where agreements are not fully
signed. Our objective is to treat you all equally and where there appears to be a basis to do so, accept your
claim for compromise purposes and assign LGSF shares based on our assessed value of your claim. By applying
this approach, as best we can, we are trying to be fair to you all and we refer you to appendix 1 where our
assessment is presented.
What do we need you to do?
One of our main aims is that investors will participate only once regarding their investments, and to help us
achieve this, we need each of you to agree to waive your claims under your PICS agreement. That will help us
as we try to clear LGSPI of all of its liabilities either by swapping them for shares in the pooled vehicle or
through other means. If we can’t do this, then it’s unlikely that the proposed compromise will go ahead.
It is anticipated that LGSF will own the majority of the proposed pooled vehicle and our current best estimate
is that recovery for LGSF would be approximately 13p - 16p / £, if we can achieve the proposed compromise.
If you all agree to release LGSPI, then subject to court approvals, LGSPI will transfer its LGSF shares to you on a
rateable basis as part of the wider compromise. Please refer again to appendix 1 to show you how many LGSF
shares you would be allocated. On average, you would receive 1 LGSF share for every £120 of claim against
LGSPI. Based on our estimated recovery of 13p - 16p / £ for LGSF, each LGSF share would effectively be worth
£15 to £18.
What we need you to do is sign the enclosed a deed of waiver (the “agreement”) which becomes effective
when LGSPI transfers its LGSF shares to you. In turn this will happen only as part of the proposed compromise.
In the event that there is no compromise, then you will retain your claims against LGSPI and its LGSF shares.
Next step
Please consider the contents of this letter and the attached agreement carefully. Take legal/financial advice if
you feel you need to and if you need to ask us any questions, please do so. Please return the attached
agreement to us as soon as possible or let us know if you don’t intend to. Ideally we need every one of you to
agree to this in order to help us in our efforts.
Yours sincerely
Gordon Wilson
Joint Liquidator and Deemed Official Receiver
LG SP Investments Ltd (in liquidation)
LG SP Investments Ltd
(in liquidation)
Unit 33k
First Floor
Snugborough Trading Estate
Union Mills
Isle of Man
IM4 4LH
Date _____________________
Dear Sirs
Settlement of claims I/we have against LG SP Investments Limited (in liquidation)
I/We, _____________________________________[Insert name(s)], of
____________________________________________________[Insert address]
have lent money to LG SP Investments Limited (in liquidation) (the “Company”) pursuant to the terms of
Property Investment & Cessation of Securities Agreement which I/we entered into with the Company,
amongst others (the “PICS Contract”). Pursuant to the terms of the PICS Contract, I/we have an outstanding
debt due from the Company for which I/we have filed a proof of debt in the liquidation of the Company (my
“Debt”).
In order to assist in achieving a compromise arrangement of the remaining assets of various Louis Group
companies, I/we now hereby irrevocably agree to waive and/or release my Debt together with any claim or
claims I/we may have against the Company, including without limitation for any and all demands, claims,
liabilities, losses and damages of any kind, which have arisen or which may in the future arise in relation to the
PICS Contract, whatsoever and howsoever arising.
In return for my waiver of claims against the Company contained in this deed, the Company will procure that
[Insert number of shares] shares (the “Shares”) in Louis Group Structured Fund Plc (in liquidation) (the “Fund”)
are transferred by the Company into my name, for which I/we hereby provide my consent.
Save for the fact that this deed may not be revoked by me/us at any time, it is a condition precedent of this
deed and this deed shall only become binding on me/us at such time as the Shares are transferred into my/our
name and this transfer has been registered in the shareholder register of the Fund.
This letter shall be governed by Isle of Man law and I/we hereby submit to the exclusive jurisdiction of the Isle
of Man courts.
This letter is executed as a deed and delivered by me/us to the Company on the date stated above.
EXECUTED and DELIVERED as a DEED
By ______________________________ [insert name(s)]
………………………………………………………….
Signature(s)
in the presence of:
Witness Signature: …………………………………………
Name: ___________________________________________
Address: _________________________________________
_________________________________________________
Occupation: _______________________________________