NEW YORK - (Mealey's) The Securities Investor Protection Act (SIPA) trustee in the MF Global Inc. (MFGI) bankruptcy on March 19 announced that he had reached a settlement agreement with JP Morgan Chase Bank N.A. that will return $300 million to commodities customers who had money invested with MFGI (In Re: MF Global Inc., No. 11-2790, Chapter 11, S.D. N.Y. Bkcy.).
MF Global Holdings Ltd. (MFGH), the parent company of MFGI, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York in 2011. As an affiliate of MFGH, MFGI also entered bankruptcy.
James W. Giddens was named the trustee regarding litigation that arose under SIPA, as commodities customers who had invested money with MFGI, sued the company following the bankruptcy.
On March 19, Giddens announced that he had reached a settlement with JPMorgan under which the bank agreed to pay $100 million to be made available for distribution to former customers. Furthermore, as a result of certain lien releases included in the settlement, the trustee said he will seek Bankruptcy Court permission to allocate an additional $200 million in MFGI funds for distribution to customers.
The agreement provides for $100 million in additional funds for the MFGI estate for distribution to customers and the return of more than $29 million in proprietary MFGI funds held by JPMorgan to secure potential obligations under a revolving credit facility agreement.
JPMorgan had previously returned more than $417 million in MFGI proprietary funds to the MFGI estate, subject to certain liens and set-off rights, the trustee said.
As part of the settlement, JPMorgan has agreed to release the liens and set-off rights related to that $417 million, which will permit those previously unallocated funds to be made available for MFGI's customers and creditors, the trustee said.
The trustee said he will request authorization from the Bankruptcy Court for the distribution of that $417 million by paying $250 million to former MFGI commodities futures customers who traded on U.S. exchangesand $50 million to customers who traded on foreign exchanges.
The settlement agreement with JP Morgan also will release substantial potential JPMorgan claims in the liquidation of MF Global UK Ltd., resulting in the return to U.K. administrators of more than $90 million in assets held by JPMorgan.
Giddens is represented by Christopher Kiplok, James B. Kobak and Sarah L. Cave of Hughes Hubbard & Reed in New York.MFGI is represented by Kenneth S. Ziman of Skadden Arps Slate Meagher & Flom in New York. MFGH is represented by Ziman, Steven J. Reisman of Curtis Mallet-Prevost Colt & Mosle in New York and Daniel J. Fetterman and Jeffrey R. Gleit of Kasowitz Benson Torres & Friedman in New York.
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