Some MF Global Clients Benefit on U.K. Valuation Date
(Corrects valuation date in first paragraph.)
Some customers of MF Global Holdings Ltd. (MFGLQ)’s U.K. unit, including Attestor Value Master Fund LP, will share an additional $59.1 million after a court said their insolvency claims against the brokerage should be valued at the time it collapsed rather than when their positions were liquidated.
About 370 MF Global clients will benefit from today’s decision as their total recovery pot increased from $450 million, Judge David Richards said in a ruling in London. Another 315 investors, with claims totaling $244 million, will see their pool decrease by $27.9 million, he said.
MF Global in 2011 filed the eighth-largest U.S. bankruptcy when it got margin calls and bank demands for money from its brokerage after the company invested in distressed European sovereign debt. KPMG LLP, appointed to wind up its U.K. unit, by March had recovered about $900 million of funds frozen in customer accounts.
The ruling lifts “the uncertainties relating to the valuation of client money claims,” Richard Heis, the U.K. administrator for the broker-dealer at KPMG, said in an e-mailed statement.
KPMG LLP, asked for valuation guidance at a two-day October trial in London. Two investors with claims in the administration were selected to argue for and against the so-called hindsight principle.
The judge’s decision “will enable us to eliminate certain reserves which will enable further payments to be made to client money creditors,” Heis said.
Attestor, a distressed-debt fund registered in the Cayman Islands, would see its claim increase by about $3 million if valued on Oct. 31, 2011, as a result of today’s ruling.
Arguing the other side at the trial was Schneider Trading Associates Ltd., whose claim would lose about $500,000 in value if tied to the Oct. 31, 2011, date and not when the securities were liquidated days later.
Lawyers representing Attestor and Schneider didn’t respond to calls seeking comment on the ruling.
The case is In the Matter of MF Global UK Limited (in special administration) and In The Matter of the Investment Bank Special Administration Regulations 2011, High Court of Justice, Chancery Division, Case No: 9527-2011
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