Feb 13 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.