MF Global Holdings, Ltd. (fka MFGLQ)

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Mediation Set for Disputes Over MF Global Settlements

By Dow Jones Business News, November 20, 2015, 03:05:00 PM EDT

Creditors, investors and former officials of MF Global will restart mediation in hopes of reaching a multimillion- dollar settlement of litigation related to the brokerage's collapse.

The parties will meet Monday with Magistrate Judge James C. Francis and are "as close as we've ever been" to a broad settlement of litigation, a lawyer for MF Global's estate told Judge Victor Marrero of the U.S. District Court in Manhattan during a hearing Friday.

They face a Wednesday deadline to make progress. On that date Judge Marrero said he would likely rule on partial settlements in the case that were negotiated individually after discussions toward a bigger settlement broke down.

Those settlements would resolve the claims brought by investors against former Chief Executive Jon Corzine, ex-finance chief Henri Steenkamp and several other former MF Global directors, for $64.5 million. Under a separate deal, accounting firm PricewaterhouseCoopers LLP would contribute $65 million toward settling claims.

However, lawyers representing the MF Global estate, responsible for collecting assets to repay creditors owed $2.4 billion, have objected to the structure of the directors' settlement, saying that it wastes $25 million in insurance money. Through a complicated insurance policy structure, a top $25 million tier of a $225 million policy wouldn't be accessible any longer if claims are settled individually rather than through a broader, so-called global settlement. Lawyers for the estate want to delay approval as mediation and negotiations toward that end continue.

Alternatively, parties that agreed to these settlements said that further delay would undo the progress that has been made and that years of negotiations toward the global settlement have failed. They pointed to the rapidly dwindling directors' and officers' insurance funds, spent at more than $1 million a month to cover legal fees, as reason to move forward with the smaller deals.

Judge Marrero said during the hearing Friday that he plans to rule Wednesday on whether to approve the settlements before him. However, he said that he would speak with Judge Francis, the mediator, after the mediation on Monday. If Judge Francis said meaningful progress was being made on a global resolution, Judge Marrero said he would wait a few more days to rule.

Even after Judge Marrero rules, the settlements would take 30 days to become effective if approved. There is also a motion before Judge Martin Glenn of the U.S. Bankruptcy Court in Manhattan to block the deals from taking effect.

Previously, Judge Marrero approved a $74.9 million settlement with a group of underwriters. The approval of the two other settlements under consideration now would bring the total fund for investors to more than $200 million, a lawyer for the investors said, amounting to roughly 20% of their damages.

Brokerage customers of MF Global, with funds recovered by Securities Investor Protection Act litigation, are set to receive roughly 95 cents on the dollar and aren't involved in the current settlement negotiations.

Write to Stephanie Gleason at [e-mail]

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11-20-151505ET
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