Massive Chapter 11 Plan Now Can Be Implemented.

[ by Howard Haykin ]

MF Global, the over-extended commodities brokerage firm run by Jon Corzine, won court approval to liquidate its assets, pay back creditors and end the $40 billion bankruptcy that rocked the financial world in 2011.  The plan approved by Judge Martin Glenn on Friday lays out how MF Global will pay back corporate creditors like lenders and bondholders - and not former customers.

The case really boiled over when it was discovered that about $1.6 billion was missing from the accounts of the broker's commodities trader customers. Regulators later determined that MF Global had misappropriated the customer money to cover liquidity gaps as it faltered - though the issue of culpability was never established .

[C-I Note:  Wall Street still feels after-shock tremors - how can we not, given the highly disturbing fact that no worthwhile or concrete findings resulted from the numerous regulatory investigations or the testimonies given by firm officials.  And the one person many believe could have answered questions - the woman who served as custodian for the customers' segregated funds, based in Chicago, never testified because her request for immunity in exchange for testifying was not agreed upon.  WHAT A WASTE!   See discussion below re: new rounds of testimony and investigations-what will these accomplish that earlier ones have not, and at what cost? ]

U.S. Bankruptcy Judge Martin Glenn approved the plan at a hearing in U.S. Bankruptcy Court in Manhattan, after noting the "long road" to confirmation.  He added:  "While there have been some very strongly held views and differences, counsel have worked exceedingly well together to resolve most of them, limiting what the court had to decide."

JPMorgan Chase & Co, agent on a $1.2 billion revolving credit facility, is a key player.  Last month, the bank reached a settlement with Freeh under which MF Global agreed to subordinate part of its intercompany claim against its finance unit as a means of increasing JPMorgan's projected recovery.  The deal avoided an objection from JPMorgan that could have been a hurdle in the plan's confirmation, raising the bank's payout forecast to as much as 76% of its total claim, from 73% previously.

But the settlement meant less of a payout for unsecured creditors of MF Global's finance unit, who will see their maximum recovery dip to 34.4 cents on the dollar from 39 cents previously.

Louis Freeh, the trustee liquidating MF Global's estate, made a rare public appearance at Friday's court hearing, providing some reassurance to customers.  "I do firmly believe the customers in this case will be made whole," he said.  Most customers have already been reimbursed for about 93% of the value of their accounts.

Ongoing Testimony and Investigations?!   While Corzine has not faced criminal charges, he and several other MF Global officials have been ordered to testify at numerous congressional hearings.  Also, congressional committees, the FBI and the SEC have launched investigations into the source of missing customer money.  No criminal charges have been filed in connection with the case, and Corzine has denied wrongdoing.  Regulators have placed some of the blame for the company's downfall on Corzine.

On Thursday, Freeh released a report pointing to Corzine's negligence, citing "the risky business strategy engineered and executed by Corzine and other officers and their failure to improve the company's inadequate systems."   The report came several months after a similar account from James Giddens, the trustee working to recover money for the broker-dealer's trader customers, which concluded that Corzine mismanaged the firm's growth.

Corzine is facing civil lawsuits from Giddens and former customers.

The case is:   In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

For further details, go to:   [Reuters, 4/5/13].