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LIBOR Bondholders Settlement

The Class Action Case Files

Portfolio monitoring and asset recovery of growing global securities class actions can be daunting.
Broadridge can help simplify the complex.

Just the Facts

On February 9, 2012, bondholders filed cases alleging artificial manipulation of the London Interbank Offered Rate (LIBOR) for the U.S. dollar over a period of several years. Eight years and two dismissals later, bondholders have now reached proposed settlements totaling $68.625 million. These preliminary settlements range from $6.25 million to $17.9 million and represent a partial settlement of all bondholder claims.

This $68.625 million bondholder settlement is one of the many LIBOR based antitrust litigations consolidated with In re LIBOR-Based Financial Instruments Antitrust Litigation, MDL No. 2262, No. 11 Civ. 2613, pending in the United States District Court for the Southern District of New York. To date, the total settlement amount across this MDL for alleged LIBOR manipulation is approaching the $1 billion mark.

The settlement class includes all persons and entities who, during the period from August 1, 2007, through May 31, 2010, inclusive (the “Class Period”), owned (including beneficially in “street name”) any bond or other debt security:

  • that has a CUSIP identification number;
  • on which interest was payable at any time between August 1, 2007, and May 31, 2010;
  • where that interest was payable at a rate expressly tied to U.S. Dollar LIBOR;
  • and that was not issued by any of the Defendants, their subsidiaries or affiliates as obligor.

The claim filing deadline to participate in the settlements is December 28, 2020 and exclusions or objections must be postmarked by November 17, 2020. A fairness hearing will be held on December 16, 2020.

LIBOR is the primary benchmark for short term interest rates globally with an estimated open notional exposure of $350-$370 trillion across derivatives, bonds, loans and other instruments. In the wake of rigging scandals such as those alleged here, regulators around the world are encouraging financial companies to use other benchmarks such as the Secured Overnight Financing Rate (SOFR) or Sterling Overnight Index Average (SONIA). Publication of LIBOR will cease after 2021. For additional information on the LIBOR transition, you can access our white paper.

Case Challenges

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1. class period is 13 years old

Typically, most financial institutions and individuals only keep copies of statements, broker confirmation and house data relating to their accounts for 7 years. As such, given the length and the start of these class periods, it is hard for a class member to (i) provide transaction information longer than 7-10 years and (ii) provide full supporting documentation that is required.

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2. Numerous eligible cusips

This settlement involves bonds and debt securities consisting of more than 40,000 individual CUSIPS. Portfolio monitoring to determine eligibility is vastly more complicated. Claim preparation and filing can take hundreds of hours just to get the data in the proper format and confirm that all the eligible CUSIPS are identified in the trade data. Significant quality assurance measures are also needed to ensure accuracy and completeness on the part of both the filer and the claims administrator.

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3. Unique complexity in obtaining cusip list

In order to obtain the list of eligible CUSIPs anyone that wishes to access the list must qualify as an Authorized Recipient by personally executing an acknowledgement of the protective order and thereafter may only disclose such data to other Authorized Recipients. Each Authorized Recipient will also need to certify to the court in writing that they have destroyed all data (CUSIP standard descriptions, CGS ISIN identifiers, CINS identifiers, etc.) within sixty days of the resolution of the Bondholder LIBOR Action.

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4. Complicated loss formula, or “plan of allocation”

Each claimant will need to calculate its Total Suppressed Interest Payment Amount which requires summing each of its Individual Suppressed Interest Payment Amounts received over the class period. This process requires multiple calculations for each day during the three-year class period that the claimant received an Authorized Interest Payment on a qualifying debt security. Recovery is then based on a claimant’s pro rata share of the net settlement fund.

The difficulty projecting potential distributions, preparing an accurate claim form, then auditing the Administrator’s distribution determination, is vastly increased in this case where we have a long, historic class period, involving over 40,000 eligible CUSIPs.

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