You’ve been thinking about selling your MF Global claim and long ago received the Trustee determination of your filed claim. Since then, you’ve gotten lots of emails from buyers stating interest, and you’ve heard everything from up to an immediate 97% payout rate to “never ever give up your rights” by selling your claim. Where is the truth in these murky waters?
MF Global Trustee James Giddens makes no comment or judgment if one should sell his or her claim or not. So why would you sell a claim? For some, it is a way of recovering as much as possible within a certain amount of time, allowing them to move on without concerns about the details and outcome of the bankruptcy. For others, who may have depended upon the secured assets held by MF Global for their livelihood and business, the ability to sell the claim offers a viable and rapid alternative for recovery in a lump sum instead of waiting possibly years for their property to trickle back.
When seeking to sell a claim, Andrew Gottesman of Second Market, a platform that brings buyers and sellers of bankruptcy claims together, says, “Be smart. Get more than one price, just as you would when selling your house. Until you sign any agreement, you should call around.”
Those following the claims market may have heard recently of prices bringing a seller’s recovery up to mid- or higher 90%. That sounds great, but when selling a claim keep in mind that the larger your claim, the more negotiating power you have. (A $5,000 claim likely will bring less than one for $5 million.) And if the offered payout seems relatively high, there may be great big strings attached. Claims trading is not a standardized industry and the terms of each contract often are negotiable. A seller, however, must understand the terms of the sale.
For example, is the payout attached to a trigger event? Or will it take longer than the standard two-day turnaround time? Will you be paying a commission? If so, how much? Do you waive all rights for possible claims not associated with the sale of your filed brokerage claim in the SIPA proceeding? When negotiating a sale, we’ve found that sometimes brokers on the other side of the phone seeking to buy your claim may not even know the answers to those questions, while at the same time putting you under time pressure to close the deal. This might be a red flag of less than favorable conditions. Most importantly, ask yourself if the buyer you are dealing with has experience in claims transactions.