NEW YORK (Reuters) - MF Global Holdings Ltd reached a deal giving it an additional five days to use about $8 million in cash from JPMorgan Chase & Co in the early stages of its bankruptcy.
The collapsed futures broker said the agreement with JPMorgan will allow it to use the cash through November 21. The deal gives it more time to locate other, longer-term sources of funding on its own or from third parties.
The $8 million currently keeping MF afloat had initially been reserved as collateral for JPMorgan as agent on a syndicated $1.2 billion credit line.
Whether MF Global, which went bankrupt October 31 after losing on big bets on European debt, can find such funding will be an indicator of the nature and speed of its restructuring or liquidation.
The agreement will be discussed at a hearing set for Wednesday before Judge Martin Glenn in U.S. Bankruptcy Court in Manhattan. The deal was disclosed in a court filing late Monday.
MF’s former CEO Jon Corzine, a Wall Street star and former New Jersey governor, resigned this month after regulators said about $600 million was missing from customer accounts at the company’s brokerage.
Federal authorities are investigating whether the money may have been improperly mixed with MF’s own funds.
JPMorgan received a lien on some MF assets in return for letting MF Global use the $8 million in cash collateral now being used by the company in bankruptcy. That drew the ire of some commodities customers who say JPMorgan was not entitled to any lien that would pay it back before customers.
A group called the Commodity Customer Coalition, led by attorney and Typhon Capital Management CEO James Koutoulas, objected to the lien in court papers on Monday.
Several commodities clients wrote to Glenn asking that Koutoulas be appointed to represent customers on MF’s official unsecured creditors’ committee, which currently includes JPMorgan, Bank of America Corp and M&T Bank Corp’s Wilmington Trust Co.
Koutoulas told Reuters on Tuesday he is working on forming a separate committee of customers and may request appointment to the official committee.
Two members of the creditors’ committee want permission to keep trading MF Global securities in bankruptcy.
Bank of America on Tuesday asked Glenn to allow it to trade stock, bonds, notes and other MF Global securities as long as it imposes an “ethical wall” to keep it from misusing information gathered through the committee.
Paul Singer’s Elliott Management Corp, also a committee member, on Monday sought permission to trade claims against MF, including securities and bank debt, as long as it isolates its trading activities from its role on the committee.
Both companies said their duties to MF Global creditors should not hinder similar duties to other clients who rely on their making well-informed trades in the securities markets.
Judges in a few major bankruptcies, including Lehman Brothers, WorldCom and Enron, have allowed such trading by creditors’ committee members, Bank of America said in its court papers seeking permission for the trades.
MF’s bankruptcy case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court for the Southern District of New York, No. 11-15059.
Editing by Gerald E. McCormick