Senior Lien
JPMorgan Chase, based in New York, was given a senior lien on all MF Global's available assets in exchange for letting it use $8 million in cash collateral during the company's first day in bankruptcy court.
Deutsche Bank AG is agent to more than $1 billion in unsecured notes. Other unsecured creditors include Headstrong Services LLC, owed $3.9 million, New York-based law firm Sullivan & Cromwell LLP, owed $596,939, and Oracle Corp., owed $302,704.
JPMorgan Chase was also given rights to what a judge said may be the only asset for unsecured creditors: so-called avoidance actions, the lawsuits that let creditors win back assets transferred out of the estate 90 days before its bankruptcy filing. The judge said he doesn't usually permit such extraordinary rights for a lender, and left the door open to re- evaluate JPMorgan's request at a Nov. 14 hearing.
Bridge To Nowhere
"It's potentially the only recoveries unsecureds have," U.S. Bankruptcy Judge Martin Glenn said when he approved JPMorgan's request at a Nov. 1 hearing. He said the company's use of cash collateral could be "a bridge to nowhere."
Shareholders, last in line to recover anything from a bankrupt estate, may get nothing if that's the case. MF Global's largest common shareholders as of Sept. 30 were Pyramis Global Advisors LLC, with 8.4 percent, and RS Investments in San Francisco, with 7.8 percent, according to court papers. RS has sold its entire stake, Erin Burke, a spokeswoman for the firm, said in an e-mail.
Fine Capital Partners LP held 7.4 percent and Cadian Capital Management LLC had 6.2 percent, the company said. J.C. Flowers & Co. owns 1.5 million preferred shares, MF Global said. Corzine, who joined MF Holdings in March 2010, is also an operating partner at J.C. Flowers.
Lawsuits
The $325 million in bonds that MF Global issued in August with an interest rate that would rise if Corzine were to receive a federal appointment from the U.S. president may now be trading more on expectation of lawsuits surrounding the former Goldman Sachs chief and his company.
U.S. regulators questioned MF Global's use of so-called repo-to-maturity transactions as early as March, well before the company issued two tranches of $325 million in debt and the company disclosed the $6.3 billion bet on Europe's most indebted nations that prompted regulatory concerns and ultimately its bankruptcy.