By Nick Brown
NEW YORK, Feb 3 (Reuters) - Former customers of Jon
Corzine's collapsed brokerage MF Global would recover most, and
probably all, of their money under the latest projections by the
trustee liquidating its bankrupt parent company.
In a court filing late on Friday, trustee Louis Freeh, the
former FBI chief, outlined an amended version of a plan for how
to divvy up MF Global's assets and distribute them among various
creditor classes.
Freeh projected MF Global's U.S. broker-dealer unit could
have up to a $120 million surplus, which would mean full payback
for the traders whose money was frozen when the brokerage went
bankrupt in October 2011.
But Freeh also said the broker-dealer unit could wind up
with a $6 million shortfall. While that is a small number in the
context of the $1.6 billion hole customers were thought to face
at the beginning of the case, and one that could likely be
bridged through other sources of recovery, it is a less certain
forecast than the version of the payout plan released last
month.
In that plan, issued by a group of unsecured creditors led
by Silver Point Capital, Knighthead Capital and Cyrus Capital
Partners, customers were slated to receive "payment in full."
The proposal from Freeh on Friday, released in cooperation
with the Silver Point group, incorporated more recent financial
data.
In addition to conceding a possible deficit at the
broker-dealer, the latest plan narrows recovery ranges for
holders of MF Global's $2.2 billion in unsecured claims. Such
creditors, which include the Silver Point group, are now
projected to recover between 13.4 percent and 38.9 percent of
claims, a range that had been pegged at between 11.5 percent and
41.5 percent in the earlier plan.
The updated proposal specifies that lender JPMorgan Chase &
Co will recover all of its roughly $7.8 million in secured
setoff claims against MF Global units, and that an unsecured
liquidity facility, for which JPMorgan was a key lender, will
recover between 13.4 and 38.9 percent of its $1.15 billion
claim.
Recovery estimates are conservative, said Brett Miller, a
lawyer for Freeh.
The amended plan represents the first time Freeh has
publicly laid out creditor payback projections since MF Global
declared bankruptcy.
MF Global was led by former New Jersey Governor and Goldman
Sachs Group Inc chief Corzine, who resigned shortly after the
collapse. Corzine remained in the spotlight due to regulators'
discovery that MF Global improperly used customer money to plug
liquidity gaps, leading to a $1.6 billion shortfall in customer
accounts. Corzine has denied any wrongdoing, and has not faced
criminal charges. He and other former executives face breach of
fiduciary duty and other civil claims from former customers.
The plan is slated to go before Judge Martin Glenn in U.S.
Bankruptcy Court in Manhattan for approval on Feb. 14.
Freeh's latest projections follow a deal reached in December
between Freeh and the trustees representing MF Global's U.S. and
British brokerage customers. That deal was approved by Glenn on
Thursday.
The bankruptcy is In re MF Global Holdings Ltd, U.S.
Bankruptcy Court, Southern District of New York, No. 11-15059.
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