* Plan would pay customers in full
* Bondholders would recover up to 42 pct of claims; lenders
up to 80 pct
* Plan's sponsors own 65 pct of unsecured claims
By Nick Brown
NEW YORK, Jan 10 Unsecured creditors of MF
Global Holdings Ltd on Thursday proposed a
liquidation plan that could pay the brokerage's former customers
The ad hoc group, led by distressed debt investors Silver
Point Capital, Knighthead Capital and Cyrus Capital Partners,
filed the proposal in U.S. Bankruptcy Court in Manhattan, saying
former traders who held accounts at the commodities broker could
receive full payback, while some unsecured bondholders of the MF
parent could recover as much as 42 percent of their claims.
MF Global declared bankruptcy in October 2011 after its
exposure to risky European sovereign debt spooked investors. The
case became a political fire storm after federal investigators
discovered that money in customer trading funds had gone missing
in the collapse.
The proposed liquidation plan comes weeks after the MF
parent and two key affiliates settled billions of dollars in
intercompany claims, providing a clearer picture of what each
unit will have at its disposal to pay back creditors.
$1.6 BILLION GAP
MF Global was led by Jon Corzine, the former Democratic
governor and senator from New Jersey, and the former chief of
Goldman Sachs Group Inc.
Investigators in Congress and elsewhere have tried to
identify the source of an estimated $1.6 billion hole that was
discovered in customer trading accounts shortly after the
company filed for Chapter 11. Corzine's role in the matter has
been unclear, though he has denied any wrongdoing.
James Giddens, the trustee in charge of liquidating MF's
broker-dealer unit and recovering as much money as possible for
customers, said in a June report that Corzine failed to address
growing liquidity needs and used customer funds to cover
liquidity gaps as the firm teetered on the brink.
Customers have so far been repaid about 80 percent of the
money in their accounts.
While it is uncommon for creditors of bankrupt firms to
propose liquidation or restructuring plans before the debtor,
MF's bondholders could be looking to curb mounting legal and
other professional fees.
The group noted in its plan outline that professionals
working to liquidate MF's parent, broker-dealer and UK units
have billed roughly $200 million in fees so far.
Both a lawyer and a spokesman for Louis Freeh, the trustee
liquidating the MF Global parent, declined to comment on
A spokesman for Giddens did not respond to a request for
Customer advocate James Koutoulas, who runs the grassroots
Commodity Customer Coalition, said on Thursday he was pleased to
see hedge funds moving for a quick liquidation that could
minimize legal costs.
The coalition, which represents the interests of former
customers, has consistently complained of high fees in the case.
Under the creditors' proposed plan, holders of about $1
billion in unsecured bonds would receive between 12 and 42
percent in recoveries. Lenders under a $1.2 billion revolver,
led by JPMorgan Chase & Co, would recover between 27 and
80 percent of their claims. The group said in court papers those
estimates are conservative.
The ad hoc group believes customers would be paid in full
within three to six months, while other creditors would receive
payouts within one year, according to a source close to the
The outline of the plan is slated to go before Judge Martin
Glenn on Feb. 14. If approved, the plan would go to creditors
for a vote.
The group that proposed the plan owns about 65 percent of
the roughly $2.2 billion in unsecured claims, so the plan
already has widespread support.