The special administrators of MF Global UK have published their third progress report, in accordance with statutory requirements.
Richard Heis, joint special administrator of MF Global UK and restructuring partner at KPMG, commented:
“While the first use of the special administration regime for investment banks has not been without its challenges, not least contending with uncertainty regarding client money (further compounded by the Lehman Supreme Court judgment), we have made strong progress in recovering the majority of funds and assets of this highly complex business and agreeing settlement terms with the US group companies. Further directions from court, scheduled for July, should further enable distribution to clients and creditors of MF Global UK.”
The full progress report is available at www.kpmg.co.uk/mfglobaluk. Key highlights from the last six months include:
Returning client monies/assets
- The special administrators have recovered a further £72 million of assets into the general estate, taking total realisations to £1.07 billion (c£280 million to be recovered).
- As at 30 April 2013, US$219.6 million has been distributed to 2,556 clients.
- To date the Financial Services Compensation Scheme has made payments totalling approximately US$48.8 million to 2,279 customers on combined client and creditor assigned claims of over US$83.9 million.
- As at 30 April 2013, £38.6 million of client assets had been returned to clients, either directly or through transfer to alternative brokers.
- A total of 187 client asset, client money and creditor claims with a value of approximately US$5.1 billion have been rejected by the special administrators.
- Segregated versus non-segregated issues.
- The special administrators, working in conjunction with MFG UK management and staff, have resolved some 1,026 out of approximately 1,300 disputed claims.
- The remaining disputed accounts are under investigation, and the special administrators are working closely with legal counsel to determine the appropriate status of these accounts.
Recent legal issues
- A judgment on the Hindsight Application was handed down on 29 January 2013. The Court held that client money entitlements of clients with open positions at the primary pooling event are to be valued at the settlement price on 31 October 2011 and not at the point of liquidation. However, claimants into the general estate will have any open positions valued at the liquidation date.
- The special administrators have filed two further applications with the Court. The first of these is seeking directions as to the basis on which to value a client’s unsecured claim into the general estate resulting from any shortfall in the client money pool. The second requests the imposition of a bar date procedure for client money claims, to facilitate further distributions from the client money pool.
- Special administrators’ time costs.
- In the six month period to 30 October 2012, the special administrators incurred time costs of £17.0 million, representing 46,938 hours of work. KPMG’s fees are subject to negotiation and agreement with the creditors’ committee.
- ENDS -
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Notes to Editors:
The conditions of the US settlement
The three pre-conditions and their status before the settlement can become effective are:
- US Bankruptcy Court approval of the settlement is achieved: this condition is satisfied and Court approval was obtained on 31 January 2013;
- JP Morgan Chase unconditionally withdrawing their claim, paying MFG UK the MFG UK Receivable and waiving and releasing any claims they made against MFG UK: this condition remains open, with Court hearings to sanction a separate JPM Chase settlement agreement scheduled for 3 July 2013; and
- Withdrawal of claims by MFG Holdings and Finance USA: this conditions remains open, however, the Special Administrators understand that MFG Holdings and Finance USA will withdraw their claims upon the other pre-conditions being satisfied.
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.