A scheme for Lehman Brothers International (Europe) (LBIE) to return trust assets has been announced by the joint administrators.

Tony Lomas, Stephen Pearson, Dan Schwarzmann and Mike Jervis, all partners at PricewaterhouseCoppers (PwC), were appointed as joint administrators to LBIE and other related entities on September 15, 2008 to wind down the business.

The administrators said an application has been made to the High Court in London in connection with a scheme of arrangement. This refers to certain client assets held by LBIE.

The scheme is intended to speed up significantly the return of trust assets controlled by LBIE to its clients, avoiding a lengthy, onerous and unpredictable process that could take years.

Approval of the High Court and LBIE creditors is needed before the scheme come into effect. This is expected to happen by the end of October 2009, creating a final date of December 31, 2009 for claims to be made. The return of trust assets should start happening by the first quarter of 2010.

The High Court hearing relating to the application of the scheme will be heard in public on the July 29 and 30 at the Royal Courts of Justice in London. The application will seek confirmation that the court has jurisdiction to subject creditors' trust property to a scheme of arrangement.

On September 15, 2008 LBIE held approximately $23 billion in client assets. Since then the administrators have returned client assets held by negotiating individual bilateral agreements with affected creditors. Although this has been successful in certain cases, it has been a lengthy process and has not completed the dealings between LBIE and its clients.

Over the next few weeks the administrators will also make a further application to the High Court for meetings of creditors. At these meetings creditors will have the opportunity to vote on the scheme of arrangement.

"We are very pleased to be able to announce a fully formulated solution to the client asset issue within nine months of LBIE's administration," commented Steven Pearson, joint administrator of LBIE and partner at PwC. "The proposed scheme is a highly innovative mechanism which will enable the return of trust assets in the quickest and most efficient way."

Fundamentally, the scheme proposes a compromise to cut through the complex issues in order to deliver a fair solution. It has the unanimous support of the LBIE creditors' committee, which contains representatives of trust clients and general estate unsecured creditors.

The bar date will enable the administrators to determine with certainty the trust claimants, allow the valuation of claims in both directions and allow LBIE to release assets to clients without the need for clients to put up indemnities and collateral as is required at present.

The scheme allows the administrators to deliver certainty of return of assets to trust creditors.

Owen Littman, general counsel for Ramius, a member of the LBIE creditors' committee, said he believed the scheme "is the best way to address the return of client assets". The LBIE creditors' committee members include Ramius Credit Opportunities Master Fund, GLG European Long/Short Fund, Legal and General Pensions, Oceanwood Global Opportunities Master Fund and Lehman Brothers Holdings.

A scheme of arrangement is a contractual compromise between LBIE and its creditors. The aim of the scheme is to speed up the return of client assets by imposing a date for submitting final claims.

This scheme is probably the most complex ever proposed. It need over 75% of creditors to vote in favour. If the scheme fails to gain approval at the creditors' meeting in October, it is likely to set progress back by at least nine months before any alternative mechanisms can be put in place.

The scheme was developed in conjunction with Linklaters.