MF Global ends bankruptcy as trustee Freeh steps down

NEW YORK Tue Jun 4, 2013 10:03pm EDT

Former FBI director Louis Freeh (R) takes questions regarding his report on child abuse allegations against former Penn State assistant coach Jerry Sandusky during a news conference in Philadelphia, Pennsylvania July 12, 2012. REUTERS/Tim Shaffer

Former FBI director Louis Freeh (R) takes questions regarding his report on child abuse allegations against former Penn State assistant coach Jerry Sandusky during a news conference in Philadelphia, Pennsylvania July 12, 2012.

Credit: Reuters/Tim Shaffer

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NEW YORK (Reuters) - Collapsed brokerage MF Global Holdings Ltd on Tuesday effectively ended its bankruptcy, saying court-appointed trustee Louis Freeh will step down and hand the estate's remaining wind-down duties to a new three-member board.

The commodities broker, led by former New Jersey Gov. Jon Corzine, went into court-protected bankruptcy in 2011 after investors were spooked by its exposure to $6.3 billion in European sovereign debt.

The company's liquidation plan put together by Freeh, a former FBI director, and MF Global's creditors, was approved by bankruptcy Judge Martin Glenn in April, and the plan went into effect on Tuesday.

"With the plan approved and a new board in place, I am confident the liquidation process can be effectively administered to the satisfaction of the creditors," Freeh said in a statement.

The plan could not go into effect until certain conditions were met or waived, one of which was that the estate had enough cash to pay its claims, according to court papers filed in February.

A new board, consisting of Daniel Ehrmann, Nader Tavakoli and Richard Katz, will finish liquidating MF Global's assets.

The bankruptcy became a political firestorm when investigators found that MF Global had misappropriated money in customers' trading accounts. Corzine and his management team have not faced criminal charges, but face civil allegations of breaching a fiduciary duty. Corzine has denied wrongdoing.

A separate trustee, James Giddens, was tapped to wind down MF Global's broker-dealer estate and return as much money as possible to customers. They are expected to receive full payouts.

Next month, Giddens will seek approval by both a bankruptcy and federal judge of a settlement with JPMorgan Chase & Co , one of MF Global's main counterparties. The deal is the last outstanding element of a global settlement resolving disputes between Giddens, Freeh and liquidators of MF Global's British affiliates.

Ehrmann, Tavakoli and Katz will each serve an initial two-year term, according to court filings. Ehrmann, a managing director at turnaround firm Alvarez and Marsal, also played a key role in the liquidation of Lehman Brothers Holdings Inc, and serves as that estate's co-head of derivatives.

JPMorgan, agent on MF Global's $1.2 billion revolving credit facility, is slated to recover as much as 76 percent of its total claim. Unsecured creditors of MF Global's finance and parent units are slated to recover around 34 percent of their claims.

The case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

(Editing by Edwina Gibbs)

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