The creditors of MF Global Holdings Ltd. overwhelmingly approved
the failed brokerage firm's liquidation plan, as the company moves
closer to a judge's final approval of that proposal.
In a Monday filing with the U.S. Bankruptcy Court in Manhattan,
MF Global said that in all but two of the classes allowed to vote
on the proposal, 100% said yes. The only two classes of voters that
didn't accept it at 100% ratified it at 99.97% and 86.92%,
respectively.
"The fact that Holders of Allowed Claims--the parties most
affected by the Plan and the Revised Interco
Settlement--overwhelmingly support the Plan is the best evidence
that the Revised Interco Settlement is in the paramount interests
of creditors," MF Global said in a separate filing made Tuesday
supporting its proposal. "Interco" refers to the intercompany
settlements that were made in the months leading up to the proposal
being filed by a group of hedge funds.
Those hedge funds hold more than $1 billion in MF Global debt
and plan to ask Judge Martin Glenn to approve their proposal at a
hearing this coming Friday. The plan proposes to repay creditors of
MF Global's general estate within a year and could restore the
accounts of brokerage customers to 100% within months.
Unlike customers of MF Global's brokerage, however, the holding
company's creditors aren't expected to recover every cent of their
money.
MF Global has faced some opposition to the plan, but it took
care of its most important counterparty, J.P. Morgan Chase &
Co., (JPM) with two key settlements during March.
One of those pacts calls for J.P. Morgan to pay $100 million to
reimburse customers and release claims it had on $417 million that
it had previously returned to James W. Giddens, the trustee
unwinding MF Global's brokerage. In another settlement with J.P.
Morgan, MF Global agreed to put $275 million owed to it by a
company finance subsidiary lower on the totem pole than money owed
to J.P Morgan.
Still, U.S. Attorney Preet Bharara has come out against the
plan, saying it unfairly shelters people indirectly associated with
MF Global from the threat of legal action. Another U.S. authority,
U.S. Trustee Tracy Hope Davis, has also cited worries about wording
that protected third parties from lawsuits. MF Global, in a Tuesday
filing, said those objections should be overruled. Another
adversary is investment firm Sapere Wealth Management, which is
fighting the way it is treated under the plan. MF Global called
Sapere's objection "meritless" in its Tuesday filing.
The liquidation plan 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 Louis J. Freeh. Mr.
Giddens is the trustee in charge of winding down the company's main
broker-dealer 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 former New Jersey governor and Goldman Sachs
Group Inc. (GS) Chairman and Chief Executive Jon S. 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 that money is now expected to all be
restored.
Write to Joseph Checkler at joseph.checkler@dowjones.com.
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