MF Global Trustee Seeks Court Permission to Repay Creditors 

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MF Global Inc. wants court approval to pay $461 million owed to its creditors, the second such payment now that it has paid back most of its customers.

In a Wednesday filing with the U.S. Bankruptcy Court in New York, trustee James W. Giddens said he wanted to distribute the cash to unsecured creditors, who have already received $518.7 million.

The latest distribution would bring unsecured creditors’ payout to 72% of what Mr. Giddens has agreed to pay. MF Global’s brokerage and commodity customers have already received 100% of the $6.7 billion they were owed.

“This is another significant milestone in the MF Global Inc. liquidation as we continue winding down the estate,” Mr. Giddens said. “When MF Global failed, the prospect of any general unsecured distribution was in doubt. I am pleased that today we are in a position where former customers and secured general claimants are fully satisfied and unsecured general creditors are now about to recover a substantial majority of their claims.”

When the trustee made his first payout to creditors, he created a reserve fund of more than $400 million for unresolved claims. After resolving 185 claims, some $263 million has been freed up to pay out to creditors. The majority of that amount—$230 million—came from a settlement with platinum and palladium traders, according to court papers.

Mr. Giddens also said it would likely cost less than $100 million to complete MF Global’s liquidation. That will free up another $116 million from a separate reserve fund set aside for administrative expenses.

The MF Global brokerage and its parent company, MF Global Holdings Ltd., imploded in October 2011 after investors fled the firm upon learning about then-Chief Executive Jon S. Corzine’s bets on European sovereign debt. The exodus created what was believed to be a $1.6 billion shortfall in customer accounts that should have been segregated from MF Global’s money pool. The shortfall has since been recovered.

In April 2013, a judge approved a liquidation plan for the brokerage’s parent, which called for unsecured bondholders to recover 12 cents to 42 cents on the dollar. Holders of a $1.2 billion revolving loan were to get 27 cents to 80 cents on the dollar under the proposal.

The brokerage isn’t technically in bankruptcy but is being unwound under the provisions of the Securities Investor Protection Act, which governs the liquidation of failed brokerages. Mr. Giddens, the trustee, serves the same role in the liquidation of Lehman Brothers Holdings Inc.’s brokerage.

Source: WSJ – MF Global Trustee Seeks Court Permission to Repay Creditors

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