Nearly 100% recoveries for MF Global Brokerage Creditors after Judge decision
Judge Paves Way for Nearly Full Recoveries for MF Global Brokerage Creditors
The bankruptcy judge approved the sale of MF Global’s brokerage litigation to its parent
A judge on Wednesday paved the way for nearly 100% recoveries for creditors of MF Global’s brokerage, an outcome considered unthinkable when the firm collapsed less than four years ago.
Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan approved the brokerage’s request to hand pending litigation against former Chief Executive Jon S. Corzine and other company leaders to its parent company, setting the stage for the nearly full recoveries for creditors.
Judge Glenn said the measure marked a “significant accomplishment” in the case.
“This result could not have been predicted when this case was first filed,” Judge Glenn said. “I think that this is a great accomplishment that you’ve achieved,” he added. The judge issued a written opinion on the matter later.
“No one could imagine recoveries like these at the outset of the case,” said Hughes Hubbard & Reed LLP’s James B. Kobak Jr., a lawyer for James W. Giddens, the trustee unwinding the MF Global brokerage. Unsecured creditors of the brokerage will get between 94 cents and 95 cents on the dollar, Mr. Kobak said in court Wednesday. He also said the case proved the mettle of the 1970 Securities Investor Protection Act, which governs the liquidation of failed brokerages like MF Global.
Mr. Giddens, in a statement, called the recoveries for creditors “unimaginable.”
“The liquidation of MF Global Inc. is now essentially complete,” Mr. Giddens said.
In exchange for acquiring the brokerage’s assets, including the pending litigation, MF Global’s parent company will forgo its right to collect on the $1.16 billion unsecured claim it brought against the brokerage. The dropped claim frees up cash that will allow the brokerage to ultimately repay up its other unsecured creditors’ claims.
Chief among the assets to be sold is the brokerage’s claims in litigation seeking to hold accountable Mr. Corzine, the former New Jersey governor, and other ex- MF Global officers, directors and employees for the brokerage’s 2011 collapse, which came in the wake of risky bets on European sovereign debt and exposed what was believed to be a $1.6 billion shortfall in customer funds.
A lawyer for the MF Global parent, Jones Day’s Jane Rue Wittstein, also said she supports the deal in court on Wednesday.
Mr. Corzine and others have denied wrongdoing for the firm’s implosion and recently agreed to pay $64.5 million to settle similar litigation brought by investors.
When MF Global collapsed in 2011, after Mr. Corzine’s bets on the debt came to light, Mr. Giddens estimated a $1.6 billion shortfall in brokerage-customer accounts.
Funds have been recovered to satisfy all the customer claims, but the creditors of the MF Global Inc. brokerage still haven’t been paid in full. Their anticipated 95% recovery is much higher than the recoveries for creditors of the parent company, who won’t get near 100% of their money back. For more recoveries, they will now be reliant on the litigation.
Unsecured creditors of the MF Global Inc. brokerage had already received nearly $1 billion—or 74% of their claims—after their most recent distribution was approved by Judge Glenn back in April.
Source: WSJ – Judge Paves Way for Nearly Full Recoveries for MF Global Brokerage Creditors
