MF Global Inc.’s former customers should get 94 cents on the dollar as disputes including a lawsuit against directors and officers delay the potential for full recovery, the failed brokerage’s trustee said.
Most customers have already recovered 89 percent of what they were owed, trustee James Giddens said in a report covering his progress from Dec. 5 to June 4 in overseeing the brokerage’s wind-down. Giddens sees the potential for 94 cents following the completion of settlements with MF Global’s U.K. unit and JPMorgan Chase & Co., according to the report filed yesterday in U.S. Bankruptcy Court in Manhattan.
Customers may recover as much as 96 percent following the settlement with JPMorgan, Giddens said. He previously projected customers would get 93 cents on the dollar.
“The trustee’s goal and aspiration remains to return as close to 100 percent of allowed net equity claims as possible for customer property while maximizing value for all creditors,” Giddens said.
A pending lawsuit against the company’s former management, including former New Jersey Governor and Goldman Sachs Group Inc. Co-ChairmanJon Corzine, will affect the size and timing of further distributions, Giddens said.
The case, in which Giddens is cooperating with class action plaintiffs, has consolidated lawsuits in multiple districts under Judge Victor Marrero in the Southern District of New York. Mediation under retired judge Daniel Weinstein, which began in February, is “progressing,” and has been extended to June 24, Giddens said.
Resolution of the U.K. and JPMorgan issue will also improve distributions for U.S. customers who traded on foreign exchanges. Those customers, who have received 18 cents on the dollar, eventually should get 84 to 91 cents, Giddens said.
MF Global Holdings Ltd., the brokerage’s parent company, filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations. The company listed assets of $41 billion and debts of $39.7 billion.
Giddens received 27,000 customer claims, and only 12 remain unresolved, he said. The current anticipated shortfall for U.S. account holders who have received 89 percent distributions is $563 million, and will be down to $205 million after the JPMorgan settlement is finalized, according to his report.
While Giddens has been overseeing distributions to former MF Global customers, a separate trustee, Louis J. Freeh, has been overseeing returns to creditors of the holding company. That company’s wind-down plan was approved in April, and will pay unsecured creditors as much as 41.5 cents on the dollar.
Separately, Freeh said yesterday that he would step down, leaving the remainder of the wind-down to be overseen by a board of directors.
“With the plan approved and a new board in place, I am confident the liquidation process can be effectively administered to the satisfaction of the creditors,” Freeh said in a statement.
The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The liquidation of the broker is In re MF Global Inc., 11-bk-02790, in the same court.
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