The special administrators of MF Global UK have today published an updated illustrative financial outcome for creditors. The update shows that available funds could amount to between $3.06bn and $3.18bn versus total client money and unsecured claims of between $3.10bn and $3.18bn.
As the US settlement agreements are now expected to become unconditional on 15th or 16th August, the joint special administrators will be in a position to declare a further distribution of 44c in the $1* for segregated clients (bringing the total interim distribution to 70c) and a first interim dividend of 43p in the £1 to unsecured creditors.
Richard Heis, joint special administrator of MF Global UK and restructuring partner at KPMG, commented: “This increase in the segregated distribution and the first interim distribution for the unsecured creditors will be welcome news to MF Global customers. Returning funds will feel like a long journey for many claimants and it is certainly the case that the first use of the special administration regime for investment banks has had some challenges; not least contending with uncertainty regarding client money (further compounded by the Lehman Supreme Court judgment). However, since our appointment we have made strong progress in recovering the majority of funds and assets of this highly complex business; progressing legal clarification in the High Court and agreeing settlement terms with the US group companies. ”
Key changes to the illustrative financial outcome since the last update published in May 2013 include:
- The Conditional US Settlement Agreements are now expected to become unconditional on 15th or 16th August 2013, following the remaining conditions being met. A pre-condition of the Conditional US Settlement Agreements is that amounts receivable from one third party financial institution are paid in full to MF Global UK. These are estimated to be in the region of $95 million;
- An adjustment to reflect the UK Supreme Court ruling on the Nortel/Lehman pension dispute, which set out that an FSD (Financial Support Direction) should rank as an unsecured claim, and not in priority to other ‘House Estate’ creditors as an expense of the Administration. Accordingly the specific contingency made in the previous illustrative financial outcome in relation to this has now been removed; and
- There has been a significant reduction in the amount of disputed claims (both in relation to classification and value). During June 2013, the special administrators rejected over 1,700 client money and general creditor claims. Following an Order obtained from the High Court in June 2013, which allowed for the setting of a Bar Date for Client Money claims and the extension of the date for proving for general creditor claims to 19 July 2013 the special administrators are not required to reserve for such claims unless their rejection is appealed. Since those rejections, the special administrators have only received one formal appeal to a rejected claim.
Full details are available at www.kpmg.co.uk/mfglobaluk.
Notes to Editors:
*For the purposes of clarity, the segregated pool is denominated in dollars and the unsecured pool is denominated in pounds sterling.
Richard Fleming, Richard Heis and Mike Pink of KPMG LLP were appointed joint special administrators of MF Global UK Limited, a UK based broker-dealer business, and MF Global UK Services Limited, which provides employee and pension services in relation to the UK operations, at 5pm on Monday 31st October 2011. MF Global UK Limited is a wholly owned subsidiary of MF Global Europe Limited which in turn is a subsidiary of MF Global Holdings Limited, a company incorporated in Delaware, USA, which filed for chapter 11 bankruptcy protection on 31st October.
The objectives of the administration are:
- To ensure the return of client assets as soon as is reasonably practicable;
- To ensure the timely engagement with market infrastructure bodies and the Authorities pursuant to regulation 13; and
- To either rescue the Investment Bank as a going concern or wind it up in the best interests of creditors.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.