MF Global Inc settled a legal dispute with a UK affiliate in a deal that will bring the failed brokerage US$500 million to US$600 million, allowing it to pay customers more money after a judge approves the settlement, a trustee said.
Announcing the agreement on Saturday with MF Global UK Ltd, trustee James Giddens said he had separately resolved conflicting claims with the MF Global parent formerly run by Jon Corzine, avoiding continuing litigation with the two affiliates.
He has filed a request for approval of the pacts in US Bankruptcy Court in Manhattan, where Judge Martin Glenn is handling the brokerage liquidation that was spurred by the eighth largest US bankruptcy, filed last year.
“Resolving complex issues with these entities marks a critical milestone in administering the MF Global Inc. estate,” Giddens said in an e-mailed statement.
“We are now focused on court approval, satisfying the conditions to the agreements and making additional distributions,” he said.
A UK trial over his US$911 million in client claims against the London-based unit had been set for April.
Giddens did not say in the statement that commodity customers would get all of their money back, though he said the brokerage’s fewer securities customers might do so.
Distributions would be made “as soon as possible” after court approval of the settlements, Giddens said. Giddens has also been liquidating the Lehman Brothers Inc brokerage since 2008.
He has paid the US-based MF Global brokerage’s US and foreign customers about US$4.9 billion since the firm failed almost 14 months ago, and excluding the proposed UK pact had US$1.2 billion in hand, out of US$1.4 billion in remaining assets, according to data through Oct. 31 included in a report earlier this month.
Most of the money in hand had to be kept in reserves because of fights with affiliates and customers, Giddens said.
Commodity customers should not expect to get paid in full unless Giddens wins key legal battles, he said at the time.
Among other fights, he has said he expects to sue insurers to try to recover US$141 million in wheat futures losses by a trader in 2008, unless they agree to pay. He has also joined a lawsuit against executives including former New Jersey governor Corzine, who headed the parent company, and continues to negotiate to recover more money from JPMorgan Chase & Co, Giddens said.
MF Global’s allowed 26,610 commodities customer claims have a total value of about US$6.7 billion, according to the recent report.
US customers with allowed claims received about 80 percent of their assets back, while those with foreign futures accounts had received only 5 percent, Giddens said.
MF Global Holdings Ltd, the parent company, filed the eighth-largest bankruptcy in October last year after a US$6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations led to margin calls. Its bankruptcy filing listed assets of US$41 billion and debt of US$39.7 billion.