MF Global U.K., BayernLB F-1 Stake, Lehman Bankhaus: Bankruptcy
MF Global Holdings Ltd. (MF)’s U.K. unit became the first company placed into Britain’s special administration program as regulators moved to protect financial stability after the broker-dealer’s U.S. bankruptcy filing.
KPMG LLP will supervise the special administration, the Financial Services Authority said in a statement on Oct. 31. The U.K. unit employed 725 people and job cuts are likely, KPMG said.
MF Global Holdings Ltd., the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine, filed Chapter 11 bankruptcy this week in New York after its bets on European sovereign debt went sour.
“Against the backdrop of challenging market conditions and the Eurozone crisis, the financial position of MF Global U.K. has significantly deteriorated in recent weeks,” Richard Fleming, a KPMG administrator, said in an e-mailed statement. “Following the filing for Chapter 11 by MF Global Holdings USA Inc., it would not be viable to operate MF Global U.K. Ltd. on a standalone basis.”
The special administrator can direct suppliers to provide key services to MF Global to facilitate an orderly resolution, the FSA said. The system was established in response to the 2008 collapse of investment bank Lehman Brothers Holdings Inc. (LEHMQ)
Bank of England Governor Mervyn King said MF Global posed too small a risk to financial stability to merit a bailout. The failure of the firm “was an example of a company where, quite frankly, there was no public interest in saving it,” King told lawmakers at a U.K. Parliament committee in London.
BayernLB Sought Quick Sale of F-1 ‘Circus,’ Ex-Chairman Says
Bayerische Landesbank’s administrative board sought a quick sale of the lender’s stake in the Formula One “racing circus” to CVC Capital Partners, the lender’s former administrative chairman told a Munich court at a bribery trial involving an ex- bank official.
“We wanted to get rid of the Formula One stake as quickly as possible, as we as a bank didn’t understand this racing- circus business,” said Kurt Faltlhauser, who headed the lender’s administrative board from October 1998 to the end of June 1999 and from July 2002 until July 2005. “The price we were offered by CVC was surprisingly high and it came as a great relief.”
BayernLB received the Formula One stake as collateral during the 2002 bankruptcy of Leo Kirch’s media group. The bank received a 10 billion-euro bailout from the German government after suffering losses on U.S. subprime mortgages.
Faltlhauser testified at the trial of Gerhard Gribkowsky, a former chief risk officer at BayernLB, who is charged with taking $44 million in bribes to facilitate the 2005 sale of the Munich-based bank’s 47 percent stake in Formula One to CVC. The trial is also scheduled to feature testimony from Formula One Chief Executive Officer Bernie Ecclestone.
Ecclestone, who is also being investigated, wanted to push BayernLB out and saw a chance when CVC showed interest, prosecutors said in the indictment. Ecclestone and Gribkowsky agreed on a plan that funneled $44 million to Gribkowsky through sham contracts and off-shore companies, according to prosecutors.
Deutsche Bank Demands Value for $2.4 Billion Lehman Claims
Deutsche Bank AG (DBK) told a judge that Lehman Brothers Holdings Inc.’s liquidation plan can’t be confirmed unless the defunct firm reclassifies $2.4 billion in claims the German bank bought from Lehman Brothers Bankhaus AG or keeps a reserve “to fully protect Deutsche Bank’s rights.”
Germany’s largest lender bought the claims from the Lehman affiliate in July 2010. Consisting of a $1.4 billion IOU from the Lehman parent and a $1 billion IOU from Lehman’s commercial- paper unit, they were classified at the time as general unsecured claims. Lehman ranked them in August as affiliate claims, which were worth less, in the third version of its $65 billion liquidation plan, Deutsche Bank said.
Lehman’s valuation of the claims cost the Frankfurt-based bank about $100 million, Deutsche Bank has said. U.S. Bankruptcy Judge James Peck denied a request to force Lehman to upgrade the claims’ value earlier this month, saying Deutsche Bank could revive the issue later.
Deutsche Bank “renews its prior motion to the court for relief requiring such claims of Deutsche Bank to be treated like and equal to general unsecured claims,” the bank said in an Oct. 28 filing.
Lehman lawyer Harvey Miller has said Deutsche Bank is “obligated” to support the company’s liquidation plan, after signing an agreement to do so.
Japan to Approve Tepco Business Plan Tomorrow, Kyodo Reports
Japan’s government will approve a reorganization plan from Tokyo Electric Power Co. tomorrow, paving the way for the company to receive state support to pay compensation to those harmed by the Fukushima nuclear crisis, Kyodo News reported.
Spain’s PP Pledges to Change Law on Personal Bankruptcy
Spain’s opposition People’s Party pledged to change the bankruptcy law to allow for debtors to be “freed” of their debts after their homes are seized for non-payment of mortgages. The measure would include “guarantees to avoid abusive behavior,” the party said in its electoral program on Nov. 1.
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