A spokesman for MF Global Trustee James Giddens says the trustee has substantial funds above and beyond what could be claimed by secured, administrative and priority claimants, which allowed him to request Court approval to make a distribution on unsecured claims.
Earlier this week Giddens filed a motion with the U.S. Bankruptcy Court for the Southern District of New York, seeking approval to make 100% distributions on allowed secured, administrative and priority general creditor claims and a first interim distribution of approximately 20% on unsecured general creditor claims.
The secured claims consists of mainly employee wage priority claims and CME Group claims; the unsecured general creditor claims include claims filed by introducing brokers, trade vendors, employees, and others according to the spokesman.
The trustee requested a reserve of $38 million in the motion filed on Tuesday for any yet to be approved secured claims, which he says would allow a 100% distribution to those claimants.
He also sought to establish a $462 million reserve for unsecured creditors. The $462 million will be used to make distributions on any currently unresolved claim that becomes allowed and “ensures that any claimant who later receives an allowed claim receives the same percentage distribution that currently allowed creditors will receive,” notes the spokesman, who adds, “The trustee believes allowed claims will be substantially less than the amount claimed and reserved for, and we do anticipate further distributions to unsecured general creditors as required reserves are reduced.”
Last week FINalternatives reported that bankruptcy judge Martin Glenn raised his “soft cap” for defense costs from MF Global’s insurance to $55 million for former executives. Jon Corzine, former COO Bradley Abelow and others must ask permission from the judge to draw from the insurance policy, which still has more than $215 million available.
Glenn, while approving the increase, was “surprised and disappointed” by the mounting legal costs incurred by Corzine and other former MF Global Holdings executives. He noted earlier this year that he expected the initial $30 million allocation to cover all [their legal] costs.
The insurance funds that the former directors and officers of MF Global are seeking to use are not funds recovered by the trustee according to the spokesman, but from various insurers obligated to pay under insurance policies issued before the bankruptcy.
The spokesman added that while the “trustee supports the Bankruptcy Court’s continued supervision and control over the use of those insurance policies by the former directors and officers of MF Global; the proceeds could be used to fund a judgment or settlement of claims pending in litigations against the former directors and officers of MF Global by the Trustee and others, which could then be recovered for the general estate.”