The trustee for the MF Global Inc. brokerage plans to sell 330 customers’ securities accounts to Perrin, Holden & Davenport Capital Corp., a sale that will bring the bankrupt firm revenue from the accounts for two years.
Most of MF Global’s smaller securities customers should have access to all of their funds, trustee James Giddens said in a filing yesterday in U.S. Bankruptcy Court in Manhattan, citing indemnity from the Securities Investor Protection Corp. Larger customers, such as those with net equity claims of about $5 million, would get about 70 percent of their assets, he said.
Giddens has transferred about 38,000 customer commodity accounts to futures brokers, and was seeking a home for about 400 securities accounts, he said. The accounts and all of customers’ collateral were frozen on Oct. 31, after the brokerage’s parent company, MF Global Holdings Ltd., filed the eighth-largest bankruptcy in U.S. history.
At a court session on the parent company’s case yesterday, Judge Martin Glenn asked for a status report at a future hearing, saying those involved in the case are entitled to know more. Glenn reads regularly in the media about the fallout from the bankruptcy, while there is “very little said in court,” and the court has been “flooded” with communications from customers of the firm, he said.
Louis Freeh, the former Federal Bureau of Investigation director who was appointed trustee for the parent company, said his work is “under way.” He has met with representatives of New York-based MF Global Holdings and understands the “urgency” of those involved in the collapse of the firm, he told the judge.
Yesterday, Giddens said he would return as much as $2.1 billion in assets to commodity customers, who aren’t protected by SIPC and have been demanding their collateral. The latest, and third, transfer to commodity customers will bring total distributions to $4.1 billion, he said in a statement.
The sale to Perrin Holden will give the MF Global brokerage estate about 20 percent of trading revenue from the securities accounts for 13 months, and 10 percent of account revenue for the following 12 months, according to court papers. Any customer who wants to move to another firm within three months of the transfer can do so without paying any charges, he said.
The shortfall in the MF Global brokerage’s U.S. segregated customer commodity accounts may exceed $1.2 billion, more than double what was previously estimated, Giddens has said. That would mean commodity customers are missing about 22 percent of their total assets of $5.4 billion.
“The trustee continues to take a conservative approach to the shortfall,” spokesman Kent Jarrell said in an e-mail yesterday, responding to questions about reports that some of the missing money may have been found. “These have always been presented as preliminary numbers that may well change, and we of course hope for the benefit of customers that the number comes down.”
Separately, Glenn signed an order yesterday allowing JPMorgan Chase & Co. (JPM), agent for a $1.2 billion loan to the parent, to file a proof of claim on behalf of itself and its fellow lenders. Interest on the loan, fees, expenses and other charges also are owed to the lenders, according to court papers.
The bankruptcy filing of MF Global Holdings listed assets of $41 billion. Jon Corzine, the former co-chief executive officer of Goldman Sachs Group Inc. (GS) and ex-governor of New Jersey, quit as MF Global’s CEO on Nov. 4.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at firstname.lastname@example.org