US court approves Sea Containers trustee claims and endorses FSDs

The United States Bankruptcy Court for the District of Delaware has approved a settlement agreement between three Sea Containers companies, their unsecured creditors and the trustees of the two Sea Containers UK pension schemes. The companies filed for relief under chapter 11 of the United States Bankruptcy Code on 15 October 2006. In the UK, the Pensions Regulator issued financial support directions (FSDs) in February 2008 requiring Sea Containers Ltd to put in place financial support for the two schemes reflecting the buyout deficit in the schemes (see Legal update, Sea Containers withdraws appeal against Regulator's decision to issue FSDs).

The trustees had sought to agree the amounts of their unsecured claims, which comprised nearly $200 million relating to the funding deficit in the schemes, $5 million for expenses and an allowance of $69 million for equalisation claims. Agreement of the claims was also conditional on the Regulator's approval of the financial support provided. Dismissing objections made by the unsecured creditors, the court upheld the quantification of the funding deficit claim on the buyout basis. Further, the court held that the issue of FSDs by the Regulator did not violate the stay of proceedings under Chapter 11, since the Regulator was simply acting in accordance with its statutory functions. Although the FSDs by themselves did not amount to an attempt to assert claims, they provided guidance on the needs of the schemes and were pertinent considerations in valuing the scheme's claims. Therefore, it was "reasonable to calculate the claims as though the FSDs were valid". The court also dismissed objections to the expenses estimate and equalisation allowance.

See In re Sea Containers Ltd et al, 19 September 2008.