By Tom Hals
Feb 27 (Reuters) - A hedge fund known for its determined
pursuit of legal claims has joined JPMorgan Chase & Co's $928
million fight against the proposed liquidation plan for MF
Global Holdings Ltd.
Aurelius Capital Management, known for its drawn-out battles
with Argentina and in the bankruptcy of Tribune Co, has backed
JPMorgan's bid to essentially step into the shoes of MF Global's
finance unit and pursue claims against the holding company.
JPMorgan had been largely alone in its fight against the
liquidation plan, which has the backing of roughly two-thirds of
MF Global's creditors and the estate's trustee, former FBI
director Louis Freeh.
At the center of the dispute is JPMorgan's allegation that a
liability of MF Global Finance USA Inc is being counted twice,
which is depressing the repayment to creditors of the finance
unit to the benefit of creditors of the holding company.
The dispute stems from a $1.2 billion liquidity facility
that JPMorgan arranged for MF Global Holdings.
Both MF Global and its finance unit were borrowers under the
facility. About $928 million of the facility was transferred
immediately from the holding company to the finance unit in the
days leading up to the October 2011 bankruptcy.
As a result, the finance unit owes money to both the holding
company and the lenders, which include JPMorgan and Aurelius.
Creditors of the finance unit could recover up to 47.7
percent of their money if the double liability was voided,
according to a filing by JPMorgan. Under the proposed
liquidation plan the maximum repayment to the finance unit
creditors would be 33.6 percent.
Aurelius said that JPMorgan was the most appropriate party
to take up the claims of the finance unit. The bank is the
administrative agent for the liquidity facility and is not
conflicted like the backers of the liquidation plan, which
includes creditors holding claims against both the holding
company and finance unit.
A hearing on JPMorgan's request to take up the finance
unit's claims will be held on March 6 in the U.S. Bankruptcy
Court in Manhattan.
Aurelius has earned a reputation for throwing itself into
restructurings and fighting to the bitter end for every penny,
with less concern about maintaining relationships than other
Aurelius is represented by William Weintraub of Stutman,
Treister & Glatt. The firm represented the investment fund in
its successful appeal in 2010 of a ruling in the bankruptcy of
Scotia Pacific Co.
Weintraub represented Aurelius in 2010 in the Tribune
bankruptcy when he was with Friedman Kaplan Seiler & Adelman. In
that case, Aurelius spearheaded a two-year fight against
Tribune's lenders, who were led by JPMorgan.
The Friedman firm is currently representing Aurelius at the
U.S. 2nd Circuit Court of Appeals in its case against Argentina
over that country's defaulted bonds. Oral argument in the appeal
is scheduled for Wednesday in Manhattan.
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