The two most significant issues in defining the ultimate distribution on claims are resolving the treatment of close-out losses on the RTM portfolio.
The special administrators of MF Global UK have published an illustrative financial outcome range of potential returns for the combined estates of the clients and creditors of MF Global UK. In terms of total funds, the high end of the estimated range would see some $3.2bn made available while the low end of the estimated range would amount to some $2.8bn. In terms of claims against these funds, the low end of the estimated range would amount to approximately $3bn while the high end of the estimated range would amount to $3.9bn. Given the large number of categorisation and priority disputes it is not possible at this stage to provide ranges for each type of claimant.
Richard Heis, joint special administrator of MF Global UK and restructuring partner at KPMG, commented: “If the high end of the funds range is returned to the combined estates and the lowest end of the range of claims succeed against the combined estate, the claimants – both clients and ordinary unsecured creditors – would be repaid in full. The two most significant issues in defining the ultimate distribution on claims are resolving the treatment of close-out losses on the RTM portfolio between MF Global UK and MF Global Inc and securing the return of the remaining funds from four financial institutions. In determining the claims, we are working to discount those we believe to be duplicative or spurious. There are still numerous work streams to be worked through but this estimated guide shows that there are circumstances where a full pay out is possible.
“While we have paid 26c in the $1 to clients of MF Global UK by way of an interim distribution, we will not be able to make a dividend to unsecured creditors until two key issues are resolved. The first hurdle is establishing the extent to which the recent ruling of the Supreme Court on Lehman Brothers will mean that funds currently in the unsecured (or House) pool could be subject to tracing for the benefit of the segregated client money pool. The second hurdle in making an unsecured dividend payment is the appeal by the Chapter 11 Trustee of MF Global Finance USA Inc, against our rejection of its net $418m claim. Both issues are likely to require court guidance before we have certainty around the available unsecured funds and are therefore able to make a payment.”
Further details on the estimated outcomes prepared by the special administrators are available at: www.kpmg.co.uk/mfglobaluk.
For client and creditor queries please contact email@example.com
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Notes to Editors:
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:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have 138,000 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.
Richard Fleming, Richard Heis and Mike Pink of KPMG LLP were appointed as the "Joint Special Administrators" of MF Global UK Limited following an application to the High Court in London by the directors of MF Global UK Limited on Monday 31 October 2011.
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.