(Updates with customer claim details from ninth paragraph.)
Feb. 2 (Bloomberg) -- MF Global Holding Ltd.’s U.K. administrators plan to make the first payment to British clients of the failed brokerage, returning 26 cents on the dollar.
KPMG LLP, the administrators of MF Global’s U.K. unit, said the figure was the most it could return at this stage because of “continued uncertainty” as to who can claim a share of the so- called client money pool.
The money will be returned to customers who had allowed claims for money in segregated, protected accounts, the firm said in a statement today on its website. The administrators are to give a report to a London court tomorrow on their progress.
KPMG has been under pressure to start returning money frozen in U.K. customer accounts since MF Global collapsed into bankruptcy on Oct. 31 after making a $6.3 billion bet on European sovereign debt. The trustee liquidating New York-based brokerage MF Global Inc. in the U.S. has so far distributed about $4 billion to customers, according to a spokesman.
While KPMG has recovered about $912 million, or 90 percent, of money held in protected customer accounts at banks, exchanges and clearinghouses, it hasn’t returned anything to clients, the firm said in a report.
Administrators in New York and London are involved in a dispute over about $742 million of customer funds used as margin collateral for American clients trading in Europe. The U.S. trustee of MF Global Inc. wants the money to come from the client money pool, which would hamper the return of funds to U.K. clients.
KPMG said if it weren’t for the MF Global Inc. claim it would have been able to return 42 cents, rather than 26 cents, on the dollar to U.K. customers.
“Subsequent distributions will be made in due course as and when the resolution of issues and claims permits,” the firm said.
Some types of account are given special status under U.K. rules to prevent retail clients from losses if an institution collapses. Large institutional clients had to specifically request protection if they didn’t want MF Global to use their funds.
KPMG has received 2,643 claims seeking a total of around $2.1 billion from customers who say they had client-money protection. Around 880 of those, with claims of about $550 million, don’t have that status, according to MF Global’s records.
“Many creditors are claiming that their funds should have been segregated, even though they were not,” KPMG said.
A further 757 claims have been received from MF Global customers without protected accounts, with a total value of about $5.4 billion. The largest claim, for $4 billion, is from an affiliate of the broker called MFG Finance USA and is related to so-called repo-to-maturity transactions, KPMG said.
Clients without segregated accounts are being treated as unsecured creditors, and won’t receive funds from the client money pool.
The U.S. brokerage case is: Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--Editors: Christopher Scinta, Anthony Aarons
To contact the reporter on this story: Kit Chellel in London at firstname.lastname@example.org
To contact the editor responsible for this story: Christopher Scinta at email@example.com