MF Global Inc. Trustee Announces Sale and Assumption Agreement with MF Global Holdings

Trustee Seeks Final Distribution to Bring Total Unsecured General Creditors Payout to 94-95%; Agreement Signifies Near End of MFGI Liquidation

Jul 24, 2015, 12:39 ET from Office of the Trustee for the Liquidation of MF Global Inc.

NEW YORK, July 24, 2015 /PRNewswire-USNewswire/ -- James W. Giddens, Trustee for the liquidation of MF Global Inc. (MFGI), and the Plan Administrator of MF Global Holdings Ltd. (MFGH) today filed a joint motion with the U.S. Bankruptcy Court for the Southern District of New York, Honorable Judge Martin Glenn presiding, seeking approval of a Sale and Assumption Agreement between the two entities and approval for a final, cumulative 94 to 95 percent distribution by the MFGI Trustee on all allowed general unsecured creditor claims other than the MFGH claims.

"This agreement marks a final chapter in the liquidation and is the best possible outcome for the MF Global Inc. estate," Mr. Giddens said. "Unsecured general creditors can now expect a near full recovery on their allowed claims, an outcome that was inconceivable when this liquidation began less than four years ago. This extraordinary result is consistent with my fiduciary duty to act with fairness and diligence to maximize returns to all customers and creditors of the MF Global Inc. estate in as short a period of time as possible."    

Under the agreement, the Trustee would sell to MFGH certain claims, estate assets, contracts, documents and data – including the Trustee's claims and discovery obligations in the litigation against former MF Global CEO Jon Corzine and others – in exchange for MFGH forgoing further distributions on its general unsecured creditor claims. If the Court approves the motion, the Trustee intends to promptly begin the final distribution, which would bring all other allowed non-subordinated general unsecured creditor claims to a total 95 percent payout, unless the distribution is delayed until after September 30, 2015 or other criteria are not satisfied, in which case the distribution would result in a total 94 percent payout.  

The return of 94 to 95 percent of claims to non-affiliated unsecured creditors within four years of commencement of the proceeding, along with earlier 100 percent distributions to customers and secured creditors, are results that could not have been anticipated when the commodities and securities liquidation began under two statutes on Halloween of 2011 with revelations of over a billion and a half dollars of missing commodity customer property. This unexpected outcome again demonstrates that the Securities Investor Protection Act, the statute that governs most U.S. broker-dealer liquidations, can be a flexible and effective mechanism in even the largest insolvencies.

The results achieved do not diminish the importance of the actual segregations failure that led to MFGI's collapse. Only extensive efforts to recover property and resolve complex claims with other administrators and financial institutions and innovative motions seeking Bankruptcy Court approval to make interim distributions and advance general estate funds to satisfy customer claims made these results possible. These results were achieved only with cooperation and assistance by the Securities Investor Protection Corporation, the Commodity Futures Trading Commission, several committees of the Senate and House of Representatives, regulators and other parties, and customers and others were subjected to uncertainty and deprived of their property while novel and difficult issues were negotiated and resolved in the courts. 

Under the terms of the Sale and Assumption Agreement:

  • the Trustee will sell to MFGH certain claims, estate assets, contracts, documents and data, including:
    • the Trustee's claims in the Multidistrict Litigation (MDL) against former officers, directors and other employees of MF Global and other third parties and claims against MFGI's insurers
    • future recoveries from MF Global UK
    • any cash remaining in the estate following the completion of the proposed final distribution to general unsecured creditors
    • all of the systems and data necessary to continue to litigate
    • certain other remaining contingent recoveries
  • MFGH will assume MFGI's corresponding liabilities in connection with the assigned claims, including discovery and document retention obligations
  • MFGH will forbear distributions on its over $1.16 billion allowed general unsecured claims in exchange for the assigned rights which will permit the Trustee to complete the proposed final 95 or 94 percent distribution on all other allowed general unsecured claims
  • In the event that a delay occurs resulting in the proposed final distribution commencing after September 30, 2015 or other criteria are not satisfied, the proposed final distribution of 95 percent will be adjusted downward to 94 percent

By selling his claims in the MDL to MFGH, the Trustee is avoiding the uncertainty and expense related to the ongoing and protracted litigation and is instead receiving an immediate recovery on those claims. The Trustee is also seeking the Court's approval for the transfer and abandonment of specified systems and documents, which would allow the Trustee to eliminate the significant expenses that come with maintaining these data systems and responding to extensive discovery requests. The cumulative effect of the agreement is the economic equivalent of an immediate injection of at least $186 million into the MFGI estate. 

This significant milestone in the MFGI liquidation follows the Trustee's full satisfaction of allowed customer, secured, administrative and priority claims, and two interim distributions for allowed unsecured claims. Thus far, the Trustee has distributed:

  • Customer claimants - $6.7 billion to cover 100 percent of allowed claims
  • Secured, administrative and priority general claimants - $33.2 million to cover 100 percent of allowed claims
  • Unsecured general claimants - $991.6 million in two interim distributions to cover 74 percent of allowed claims

Seven claims against MFGI remain in dispute, and the Trustee is seeking to establish a final unsecured claims reserve to account for those claims, while releasing all unnecessary reserves.  After the remaining claims are resolved, the Trustee intends to close the MFGI estate, ending the liquidation proceeding.

The information in this statement does not apply to any other MF Global entity, including separate insolvency proceedings involving the parent company, MF Global Holdings Ltd.

Media Contact for MF Global Inc. Trustee:
Kent Jarrell
kjarrell@apcoworldwide.com
202-230-1833

 

SOURCE Office of the Trustee for the Liquidation of MF Global Inc.