MF Global customers to get most of their money back: Freeh

Sun Feb 3, 2013 11:07am EST
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By Nick Brown

NEW YORK (Reuters) - Former customers of Jon Corzine's collapsed brokerage MF Global would recover most, and probably all, of their money under the latest projections by the trustee liquidating its bankrupt parent company.

In a court filing late on Friday, trustee Louis Freeh, the former FBI chief, outlined an amended version of a plan for how to divvy up MF Global's assets and distribute them among various creditor classes.

Freeh projected MF Global's U.S. broker-dealer unit could have up to a $120 million surplus, which would mean full payback for the traders whose money was frozen when the brokerage went bankrupt in October 2011.

But Freeh also said the broker-dealer unit could wind up with a $6 million shortfall. While that is a small number in the context of the $1.6 billion hole customers were thought to face at the beginning of the case, and one that could likely be bridged through other sources of recovery, it is a less certain forecast than the version of the payout plan released last month.

In that plan, issued by a group of unsecured creditors led by Silver Point Capital, Knighthead Capital and Cyrus Capital Partners, customers were slated to receive "payment in full."

The proposal from Freeh on Friday, released in cooperation with the Silver Point group, incorporated more recent financial data.

In addition to conceding a possible deficit at the broker-dealer, the latest plan narrows recovery ranges for holders of MF Global's $2.2 billion in unsecured claims. Such creditors, which include the Silver Point group, are now projected to recover between 13.4 percent and 38.9 percent of claims, a range that had been pegged at between 11.5 percent and 41.5 percent in the earlier plan.

The updated proposal specifies that lender JPMorgan Chase & Co (JPM.N: Quote) will recover all of its roughly $7.8 million in secured setoff claims against MF Global units, and that an unsecured liquidity facility, for which JPMorgan was a key lender, will recover between 13.4 and 38.9 percent of its $1.15 billion claim.   Continued...