MF Global Parent Answers JPMorgan Objections to Liquidation
MF Global Holdings Ltd.’s trustee amended an information document to address objections of JPMorgan Chase & Co. and other parties ahead of an April 5 hearing on a liquidation plan.
Trustee Louis Freeh, unwinding the parent of the failed brokerage formerly headed by Jon Corzine, joined a creditor group including Citigroup Global Markets Inc. and Silver Point Capital LP and proposed to distribute as much as 34 cents on the dollar to unsecured claimholders. JPMorgan, which arranged a $1.2 billion loan for the defunct holding company, said a change in liability for the loan might bring creditors almost 60 cents on the dollar.
An exhibit to a court filing today shows the New York-based bank’s arguments were added to the information document, which must be approved before a payment plan can be heard in court.
While customers of brokerage MF Global Inc. have received almost all of their money back, Freeh hadn’t come up with a plan to pay holding company creditors until after the group of banks and hedge funds filed a rebel plan of their own on Jan. 10. After joining them, Freeh negotiated a revised plan that cut the payout and is pressing with them for court approval of the amended information document and payment scheme.
“The plan proponents believe that the objections should be overruled or considered at the confirmation hearing, if they are not resolved prior to that hearing,” they said in the filing in U.S. Bankruptcy Court in Manhattan. “The plan proponents fully anticipate, however, that they have resolved the majority of the issues raised by the objectors prior to the disclosure statement hearing through the language added to the disclosure statement.”
A hearing on the disclosure statement is set for Feb. 14. The judge agreed to consider the liquidation plan April 5, according to the filing.
JPMorgan, the biggest U.S. bank, faulted disclosure of liability for part of the loan it arranged, saying that $928 million of the funds were counted twice, because the holding company passed the money to its finance unit. The unit, as a result, owed the money both to the holding company and to the lenders, it said in a Feb. 7 filing. If the debt was only paid once, creditors could recover almost twice as much, it said.
The group that filed the first liquidation plan said their goal was “to facilitate the prompt and efficient conclusion of the Chapter 11 cases.” Their members, including Blue Mountain Timberline Ltd., Cyrus Capital Partners LP, Deutsche Bank Securities Inc. and Waterstone Capital Management LP, hold about 65 percent of certain MF Global loans and bonds, they said.
Professional fees and expenses are eroding the assets left for MF Global creditors, according to the group’s filings. Bankruptcy lawyers and advisers have put in bills for $48.7 million, of which about $27.2 million was unpaid on Nov. 30.
MF Global filed the eighth-largest U.S. bankruptcy on Oct. 31, 2011, after getting margin calls and bank demands for money following its investment in the debt of troubled European economies. The company, which was headed by former New Jersey Governor Corzine, listed assets of $41 billion and debt of $39.7 billion in its Chapter 11 filing.
Trustee James Giddens is separately liquidating the brokerage.
The case is In re MF Global Holdings Ltd., 11-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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