NEW YORK--A bankruptcy judge on Tuesday cleared MF Global Inc.
to pay back 100% of the money owed to its U.S. and overseas
commodity customers, a watershed moment in the collapsed brokerage
firm's Chapter 11 case.
"I don't know of anyone who thought when the case started that
the foreign and domestic commodity customers would be looking at
100% recoveries," said Judge Martin Glenn of U.S. Bankruptcy Court
in Manhattan.
James W. Giddens, the trustee unwinding MF Global's brokerage,
won approval to allocate about $305 million from his coffers into
an account that would pay back the customers by the end of the
year. The money is technically considered an "advance," which will
allow Mr. Giddens to collect the money later from MF Global
Chairman and Chief Executive Jon S. Corzine and other former
executives if they lose a class-action lawsuit from customers and
investors over their alleged mismanagement of the firm that led to
its collapse.
Before Tuesday, Mr. Giddens had recovered 98% of money for U.S.
commodity customers and 74% for those trading on foreign
exchanges.
Lawyers for Mr. Corzine, along with attorneys representing
former No. 2 Bradley I. Abelow, ex-finance chief Henri J. Steenkamp
and other top brass didn't object to the customers getting their
money back, but did take issue with Mr. Giddens's characterization
of the money as an advance that could later be recovered from the
executives. Judge Glenn told a lawyer for Mr. Steenkamp that he
didn't think the former executives had standing to make an argument
about the allocation. The issue for the executives was about
whether his ruling would hurt their arguments in the class-action
suit.
Mr. Giddens said, "In the opening moments of the liquidation
proceeding, it seemed inconceivable that we would even consider the
possibility of 100% return of property owed to former customers of
MF Global."
When MF Global collapsed into bankruptcy on Oct. 31, 2011, after
Mr. Corzine's big bets on European sovereign debt went bad, Mr.
Giddens estimated a $1.6 billion shortfall in brokerage customer
accounts.
Since that time, however, trustees for both the company and its
brokerage business worked to recover money for creditors, and the
shortfall is all but gone.
Individual customers of MF Global's brokerage, which is being
managed by Mr. Giddens, had already recovered most of the funds
that were caught up in the firm's collapse but needed to reach key
settlements with the Commodity Futures Trading Commission and
others to allocate the rest.
For creditors of the brokerage's parent company, Judge Glenn
approved a proposal earlier this year that would pay holders of
about $1 billion in MF Global's unsecured bonds between 12 cents
and 42 cents on the dollar for their claims, with claims stemming
from a $1.2 billion revolving loan recovering between 27% and
80%.
Still, Mr. Corzine, a former Goldman Sachs Group Inc. (GS)
chairman and New Jersey governor, is facing multiple lawsuits over
the implosion, including the one from the former customers, another
from the litigation trust representing MF Global's parent company,
and one from the CFTC. Mr. Corzine and other accused executives
have denied any wrongdoing.
(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@wsj.com
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