THE action group representing KSF Isle of Man depositors has said it has “extreme disappointment” over a decision by Treasury Minister Anne Craine not to instigate a loan trust proposal suggested by the depositors.

A spokesman said today, “We find the reasons advanced for the Treasury decision wholly unconvincing and note with dismay Mrs Craine's view, expressed to members of the select committee on KSFIOM, that any such action “would now achieve little.” ”

Mrs Craine, in a written response to the group, said that some depositors not included in the loan trust arrangement “may well feel aggrieved and challenge the equity and legality of the proposal.”

She also pointed out that approximately 75% of  depositors with KSF (IOM) Ltd have been fully  compensated by the Early Payment Schemes and the Depositor Compensation Scheme. All other  depositors and creditors with approved claims have received at least 73.6p In the £ from the

liquidation.

She added, “The latest  projected dividend  outcome is expected to be  between 91.4p and

97.7p In the £, dependent upon the final realisation of assets. Whilst lt  is understood that

 depositors may have to wait until 2017 to receive the final dividend, the liquidator currently

 anticipates that virtually all assets will have been recovered by the end of 2014 and

 estimates that distributions could reach 80% by the end of 2011 and 90% by the end of

2012.”

However, angry depositors said today that Mrs Craine’s detailed reply to their request contained some “highly insensitive and offensive” remarks. They said that higher-value depositors and life company bondholders had been “abandoned to their fate”.

The depositors also said they wished to “contest most strongly” the Tynwald select committee's attempts to blame the collapse of the bank exclusively on the actions of the UK authorities, claiming KSFIOM collapsed “because it made deposits with a counter-party (KSF UK) which could not meet its liabilities.”

They added, “Accordingly, we are calling on Ms Craine to reconsider her position with regard to the proposed loan trust and to issue a statement correcting the inaccurate statements made to date with regard to the role of the IOM authorities in the insolvency of KSFIOM.

“Until that time, we remain committed to highlighting the unnecessary distress that the dilatory response of the IOM authorities has caused to innocent depositors and bondholders and to seeking to avoid a repetition of this state of affairs.”

Mrs Craine’s response concluded, “It is appreciated that the Loan Trust Scheme is presented as  an outline proposal at this stage, however, in our experience of developing the KSF Scheme of Arrangement, which was not accepted, we believe that such a proposal would take a significant amount of time to prepare all the necessary documentation and to obtain the approval of all  parties to the agreement.

“Documentation would need to take into consideration the  legal and practical implications of the Isle of Man insolvency law and the Isle of Man Compensation of Depositor Regulations 2008 (as amended). I am led to the conclusion that the costs involved would be very high and not provide value for the taxpayer.

“The Treasury reached the overall conclusion that the Loan Trust did not offer "a  simple, minimal cost and efficient solution to addressing this issue," and therefore the Isle of Man Treasury will not be progressing this proposal.”