The special administrators of Worldspreads have today published the first creditors’ report, in accordance with their statutory obligations.
Jane Moriarty, restructuring partner at KPMG and joint special administrator, said: “Our priority has been to analyse the company’s records so that we can agree the balances, which is an important first step in starting to return money to clients. We have now issued around 18,000 statements to clients, and to date have agreed approximately two thirds of the client creditors’ balances.
“We have commenced our review into the reasons for the company’s failure and have, to date, taken possession of around 24 terabytes of data (this is equivalent to 10 billion A4 pages and is larger than The Library of Congress which has 20TB). While we are able to indicate high level data around funds collected and funds owed, it will be some time before an exact position on the return can be given. A broad guide at the moment suggests a return to client creditors of 30-35p in the £1.”
Key facts from the creditors’ report:
- Overall financials: the special administrators have identified approximately £30m in client claims and have found around £5m in segregated accounts and £11m in house accounts;
- All Worldspreads’ retail clients are currently thought to hold segregated status and are therefore able to claim against the segregated pool. As there will be a shortfall in money owed, the clients will then have an unsecured claim against the estate;
- The special administrators are working closely with the Financial Services Compensation Scheme (FSCS) to establish eligibility for compensation and confirm client statements so the FSCS can finalise its claims process and pay compensation to eligible customers under its rules. The FSCS will only use agreed balances to determine compensation amounts;
- All, but approximately 90 Worldspreads’ clients, had accounts worth less than £50,000;
- Once the FSCS has agreed to compensate a client, they will then take on that client’s claim against the estate;
- While the Special Administration Regime stipulates that individual client addresses should be redacted from the creditors’ report, the special administrators were granted an order by the court to redact all client details (including names) because the company’s records did not distinguish between corporate and individual clients and the administrative burden of distinguishing the two from thousands of records would have proved disproportionately expensive;
- Non-client, creditor details are available in the report (as set out in the legislation);
- In accordance with their statutory obligations, the special administrators are also investigating the conduct of the directors in the run up to the collapse of Worldspreads. The report on this investigation is confidential and will be filed with the Department for Business, Innovation and Skills;
- Special administrators’ fees to date are approximately £900,000;
- The next update on the special administrators’ progress will be made at the creditors’ meeting on 23rd May 2012.
The full creditors’ report is available at: www.kpmg.co.uk/worldspreads.
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Notes to Editors:
Jane Moriarty and Samantha Bewick of KPMG were appointed joint special administrators of Worldspreads Ltd, a UK based spread betting business, by the High Court on Sunday 18th March 2012. Worldspreads Limited was a wholly owned subsidiary of Worldspreads plc, a company incorporated in Dublin, Ireland. The business employed 66 staff. Some staff were retained by the special administrators to support the orderly wind down of the business but all but one member of staff have now been made redundant.
The Special Administration Regulations were brought in following the administration of Lehman’s European business. In many respects a special administration is very similar to an ordinary administration. As such, it is subject to the supervision of the English High Court in London. However, some of the differences are set out below:
A) The special administrators have to pursue three objectives (although the order in which they appear is not important):
- To ensure the return of client assets as soon as is reasonably practicable;
- To engage with market bodies and regulators both here and abroad in a timely fashion; and
- To rescue the business as a going concern or to wind it up in the best interests of the creditors.
B) If there are insufficient securities in a particular stock line in an omnibus account to meet all valid proprietary claims to that stock line, clients will bear the shortfall pro rata and have an unsecured claim for the balance. Due to the accounting irregularities that have been discovered, it is likely that there will be a shortfall to clients. One of the immediate priorities of the special administrators will be to investigate and attempt to reconcile all client positions in order to establish the extent of the shortfall.
As in an ordinary administration where sufficient realisations are made to enable dividends to be paid, in due course, the special administrators expect to pay dividends to unsecured creditors who submit proofs of claim by the last date for proving (which has not yet been set).
C) A creditors’ committee can be established to assist the special administrators to fulfill their functions. Membership may include both creditors and clients with proprietary claims only. A committee of between 3 and 5 members will be formed at an initial meeting of creditors to be held as soon as is reasonably practicable and, in any event (absent an order of the Court extending time), within 10 weeks of the date on which Worldspreads Limited went into special administration.
D) The costs and expenses of dealing with and distributing client assets are paid out of client assets. Other costs and expenses are paid out of the company’s assets.
The appointment of special administrators to Worldspreads Ltd is the third use of the new regime. The first use of the regime was MF Global UK: Richard Fleming, Richard Heis and Mike Pink of KPMG were appointed special administrators of MF Global UK on 31st October 2011. The second use of the regime was the appointment of special administrators from Mazars to Pritchard Stockbrokers Ltd on 9th March 2012.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.