Page last updated at 18:29 GMT, Thursday, 19 February 2009

Depositors 'closer' to KSF payout

Isle of Man courts
The High Court gave the government more time to finalise the scheme

Depositors in the collapsed Isle of Man bank Kaupthing Singer and Friedlander (KSFIoM) are a step closer to getting some of their money back.

The High Court in Douglas heard details of a scheme of arrangement in which up to 60% of funds would be returned.

Treasury officials believe the scheme would offer a better outcome for the 10,000 depositors than a liquidation.

The hearing was adjourned until 9 April for further changes to the scheme, which needs depositor approval.

The Manx Government has agreed to contribute 150m towards compensating depositors as part of the scheme, which would also be funded by the banking sector and from recovered assets.

It estimates 54% of depositors would get back all of their funds within three months, while 71% would be fully refunded within two years, the court heard.

Legal action

However, payouts for the 29% with high balances would be less certain, with the level of returned money depending on the level of bank assets recovered.

About 540m of the assets needed to repay savers are under the control of the liquidator provisional.

But the court heard about 400m was held in the UK and frozen by the UK government during the crisis that engulfed its Icelandic parent bank, Kaupthing.

It is not yet known how much of this money, if any, will be returned to the provisional liquidator.

The liquidation hearing was adjourned on Thursday to allow changes to the scheme of arrangement which would allow savers to pursue legal action against third parties.

Treasury officials said they hope to arrange a vote among depositors within the next month.

Depositor action groups are opposing the scheme of arrangement, claiming that KSFIoM should be placed into liquidation.

This would trigger payouts from the Isle of Man depositor protection scheme, under which savers would be eligible to receive up to 50,000 of what they have lost, plus any other money the liquidator is able to recover.

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