High Court gives MF Global administrators right to return £54m

by Rachael Singh

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19 Jul 2012

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KPMG ADMINISTRATORS have managed to achieve High Court approval for the return of £54m in assets to MF Global creditors.

Richard Fleming, Richard Heis and Mike Pink, partners at KPMG, were appointed joint special administrators of MF Global UK in November 2011.

The application to approve the asset distribution at the High Court was successful this week, with the administrators hoping to make returns as early as 1 August.

Heis said: The "Court hearing represents an important milestone in returning some £54m of agreed client assets; largely comprising shareholdings plus some physically held securities and LME commodities and warrants. The MF Global UK asset distribution plan sets a precedent as it is the first use of such a plan under the special administration rules.

"We will be sending letters to clients with agreed asset claims over the coming days to explain and agree the final steps in returning their assets.

"It is important to note that there is still over £1bn of alleged asset claims, principally where it is claimed that MF Global UK held the assets on behalf of clients but the company's records show that the assets were transferred to MF Global UK under absolute title transfer. The single largest alleged client asset claimant is MF Global Inc., which has submitted a claim for the return of $639m (£408m) of US treasury bills and other assets.

"We have issued court proceedings to seek determination of the validity of the claim; the trial is scheduled for April 2013."

The collapse of MF Global saw the first special administration take place.

A special administration entails the administrators focusing on three tasks: making a swift return of client assets; ensuring timely engagement with authorities; and rescuing the business as a going concern, or winding it up in the best interests of the creditors.

A regular administration involves the latter, but not the first two objectives.

With those tasks in mind, special administrators would try to ascertain the funds held in segregated accounts – which are clients' funds for investment – and then return the funds to them. In regular administrations, assets are pooled together and then divided between creditors.

The special administration regime (SAR) was created in February 2011 after Lehman Brothers collapsed at the end of 2008. The company is still embroiled in legal battles, with some creditors awaiting full payment.

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