Pacts in MF Global liquidation could free up cash

Settlements between parties with completing claims in the liquidation of MF Global could speed up payment to customers of the collapsed brokerage, with one agreement potentially freeing up as much as $600 million for U.S. customers.

Two separate agreements were announced on Saturday. One is between James Giddens, the bankruptcy trustee overseeing the liquidation of MF Global’s main brokerage unit, and Richard Heis, who is overseeing the liquidation of the company’s United Kingdom operations. Giddens and Heis agreed to resolve all claims between the two corporate entities.

Giddens also reached an agreement resolving claims between the estate representing creditors of the brokerage unit and the one representing those of parent company MF Global Holdings Ltd.

Giddens said in a prepared statement that the agreements “are in the best interests of former customers and other creditors,” and allow trustees to request court approval for additional cash distributions.

The agreement between the brokerage unit trustee and the UK-based unit could result in $500 million to $600 million being returned to the estate for U.S. brokerage customers, the parties said.

Giddens said he has applied with a U.S. bankruptcy court to make additional distributions as a result of the agreement.

Heis said the agreement will “clear important obstacles and allow us to significantly reduce reserves that have blocked us from additional distributions to the former customers and creditors of MF Global UK.”

Due to litigation, just 10 percent has been distributed so far out of the $2.5 billion that’s been collected for those customers, Heis said.

With the agreements in hand, “we will move quickly to get money in agreed claimaints’ pockets at the earliest opportunity,” Heis said.

Giddens has been combing through the accounts of MF Global since it filed for bankruptcy protection in October 2011. MF Global, which was headed by former New Jersey Gov. Jon Corzine, collapsed after making a disastrous bet on European debt.

Regulators have been investigating whether MF Global tapped money from clients’ accounts as its financial condition worsened. That would violate securities laws. Brokerages are required to keep customer money separate from the firm’s money.

Much of the money that went missing belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from the fluctuating prices of commodities such as corn and wheat.

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