Feb 13 (Reuters) - MF Global Holdings Ltd amended its liquidation plan to take into account demands from creditor JPMorgan Chase & Co but the trustee overseeing the company's bankruptcy warned that the changes could expose JPMorgan to a legal attack.
JPMorgan arranged for a $1.2 billion liquidity facility for MF Global Holdings, led by former New Jersey Governor and Goldman Sachs Group Inc chief Jon Corzine.
About $928 million of the facility was transferred immediately to a unit of the company, MF Global Finance, in the days leading up to the bankruptcy of MF Global in October 2011.
As a result, the finance unit owes money to both the holding company and the lenders, including JPMorgan.
Creditors of the finance unit could recover up to 47.7 percent of their money if the double liability were voided, according to a filing by JPMorgan, which was also the agent for the liquidity facility.
That is more than the maximum 33.6 percent those creditors would receive under a plan proposed earlier this month by Silver Point Capital, Knighthead Capital and Cyrus Capital Partners in conjunction with trustee Louis Freeh.
The bank said the double liability could be voided or subordinated to other debts, which would enable the trustee to pay more money to the finance unit's creditors.
MF Global included JPMorgan's information in its revised disclosure statement on Tuesday, which describes the liquidation plan that creditors must vote to approve.
But the revised disclosure statement also includes a warning to JPMorgan. Knighthead Capital said that some of the legal strategies that could be used to attack the double liability "apply with equal force to disallow or subordinate JPMorgan's own claim against (the finance unit)."
Knighthead Capital said that was because the money transferred by the holding company to the finance unit ended up enabling payments to JPMorgan.
A hearing on the disclosure statement is set for Thursday, with a final confirmation hearing set for April.
Corzine resigned shortly after the firm declared bankruptcy related to its exposure to risky European sovereign debt.
The case became a political firestorm after federal investigators discovered that money in customer trading funds had gone missing in the collapse.
The bankruptcy is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.