MF Global payout plan approved for creditor vote

Thu Feb 21, 2013 5:21pm EST
 

By Nick Brown

NEW YORK (Reuters) - A bankruptcy judge on Tuesday approved the outline of a plan by liquidators and creditors of failed brokerage MF Global MFGLQ.PK to repay the company's creditors, a key step toward ending its $40 billion Chapter 11 bankruptcy.

At a hearing in U.S. Bankruptcy Court in Manhattan, Judge Martin Glenn green-lighted the outline, which was amended to address minor concerns Glenn had raised in refusing to approve an earlier version of the outline last week.

MF Global, which had been led by former New Jersey Gov. Jon Corzine, is liquidating after declaring bankruptcy in October 2011. Investors ran for the hills after the company revealed exposure to risky European sovereign debt.

The case became a political firestorm when regulators discovered an estimated $1.6 billion hole in the trading accounts of the broker's trading customers, later determined to be caused by the improper use of customer money to plug liquidity gaps.

Corzine resigned shortly after the bankruptcy, and has denied any wrongdoing.

Under the payout plan, the company's trader customers would be repaid in full. Louis Freeh, the trustee liquidating the MF Global parent, has agreed if necessary to support an effort by customers' trustee James Giddens to allocate some of the broker's general estate assets to customer accounts to ensure their full recovery.

Unsecured creditors of the MF Global parent are projected to recover between 13.4 cents and 39 cents on the dollar, while creditors of its finance unit will receive between 14.7 cents and 34 cents on the dollar.

Creditors under a $1.2 billion loan, including JPMorgan Chase & Co (JPM.N: Quote), have claims against both the MF parent and its finance unit. They could recover as much as 39 cents on the dollar from the parent, and up to another 34 cents on the dollar from the finance unit, according to the plan's projections.   Continued...

 
The sign marking the MF Global Holdings Ltd. offices at 52nd Street in midtown Manhattan is seen in New York November 2, 2011. T REUTERS/Shannon Stapleton