On January 31, 2013, the judge presiding over the MF Global, Inc. (“MFGI”) bankruptcy approved a settlement between MFGI and its UK affiliate and also green-lighted further distributions. The trustee indicated in court that he immediately will make distributions to bring non-affiliate 4d / domestic futures customers up to a 93% level of recovery and 30.7 / foreign futures customers up to an 18% level. Additional recoveries should occur on behalf of 30.7 customers over time that the trustee expects will result in staggered distributions bringing 30.7 customers up to about 54% within a few months and then around 80% a little later.
Notably, the trustee and major creditors of MFGI’s domestic affiliates have indicated in a recent court filing that they now project 100% recovery for non-affiliate commodity customers. Notwithstanding that projection from these highly sophisticated and engaged parties, the MFGI trustee appears to estimate a continued customer asset shortfall of several hundred million dollars subsequent to the aforementioned distributions. If such a shortfall continues to exist then MFGI’s proprietary assets, which should be well in excess of that required to eliminate the shortfall, may need to be partly reallocated to customers to bring 100% distributions. In theory a legal controversy may exist regarding whether such a reallocation should occur, but in reality the reallocation may not be contested because the largest general unsecured creditors of MFGI are domestic affiliates that have their own commodity customer claims against MFGI and that have also agreed in a separate settlement agreement to not contest such a reallocation.
Neal R. Stevens
Of Counsel
312 565.1045 tel (chi) | 212 334.7948 tel (nyc)
917 301.4744 cel | 312 565.8300 fax
Read past articles by Neal R. Stevens:
- Proposed MF Global Settlements Lay Groundwork for Potential 100% Recovery For All Commodity Customers
- 2012 Sees NFA and CFTC Provide Enhanced Protections for Customer Funds Held at FCMs
- MF Global Inc. Trustee Begins Processing General Creditor Claims
