NEW YORK--A judge on Friday confirmed a liquidation plan for MF
Global Holdings Ltd. (MFGLQ), both a milestone and a beginning to
an end of one of the more notable brokerage collapses in
history.
Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan
approved the proposal, presented by a group of hedge funds that
hold about $1 billion in unsecured MF Global bonds.
"It's been a long road to get to this point," Judge Glenn
said.
The decision came a day after Louis J. Freeh, the trustee
overseeing the bankruptcy of MF Global, issued a scathing report
about former Chief Executive Jon S. Corzine, blaming the former New
Jersey governor and Goldman Sachs Group Inc. (GS) chairman for the
company's epic collapse.
Mr. Freeh himself spoke in court Friday, citing "really an
extraordinary amount of good and positive work" by the parties
involved.
"We've taken it to a very good point and successful point in 17
months of work," Mr. Freeh said.
In confirming the plan, Judge Glenn overruled an objection by
longtime MF Global adversary Sapere Wealth Management, which argued
how its $70 million in remaining claims were being treated. During
the hearing, MF Global worked out a language change with a lawyer
for U.S. Attorney Preet Bharara, who had thought the plan unfairly
shielded certain third parties from prosecution. The changes will
allow the U.S. more flexibility if it wants to sue third parties
related to MF Global later in the case.
Another objection, from bankruptcy monitor Tracy Hope Davis of
the U.S. Trustee's Office, took issue with fee reimbursements to
Silver Point Capital LP and the other hedge funds that presented
the liquidation proposal. But Judge Glenn said he wouldn't decide
that matter on Friday.
"I've got to be the one to make this determination, not somebody
else," Judge Glenn said to a lawyer for the hedge funds, which
proposed the fees. He did say "a very strong case has been made"
that the creditors deserve the fees.
The liquidation plan filed by the hedge funds calls for holders
of about $1 billion in MF Global's unsecured bonds to recover
between 12 cents and 42 cents on the dollar for their claims under
the plan, with those holding claims on a $1.2 billion revolving
loan getting more, between 27 cents and 80 cents on the dollar.
While it is the group of hedge funds that filed the proposal,
the MF Global holding company's bankruptcy is being administered by
former Federal Bureau of Investigation Director Mr. Freeh. MF
Global's broker-dealer business isn't technically in bankruptcy,
but rather is being overseen by James W. Giddens, who is winding
down the business under the Securities Investor Protection Act,
which governs the liquidation of failed brokerages.
Late last year, Mr. Freeh, Mr. Giddens and a third official
liquidating MF Global's U.K. arm struck a wide-ranging deal
designed to get customers their money back more quickly and settle
disputes among themselves. That set in motion a chain of events
that led to the filing of a payback plan by the creditors.
Individual customers of MF Global's broker-dealer have received
most of their money back through a series of bulk transfers
initiated by Mr. Giddens and approved by the court.
MF Global, led by Mr. Corzine, collapsed in October 2011 when
customers panicked over the New York firm's large bets on European
debt. The firm's collapse into bankruptcy initially exposed a $1.6
billion shortfall in U.S. customer accounts, although Mr. Freeh in
court Friday reiterated that he believes all that money is expected
to be restored.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@dowjones.com. Follow
him on Twitter at @JoeCheckler
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