Bloomberg News

LCH, ICE Join MF Global Suit Over $600 Million Collateral

November 16, 2012

LCH.Clearnet Group Ltd. and Ice Clear Europe Ltd. today won permission to join a lawsuit between liquidators of two MF Global Holdings Ltd. (MFGLQ:US) units over assets worth about $600 million.

MF Global Inc.’s U.S. trustee and administrators of MF Global UK Ltd. are fighting in London over ownership of U.S. Treasury bills sent to the U.K. as collateral against purchases of bonds issued by debt-laden European nations. The clearinghouses said their rights to collateral held against the broker’s proprietary trades were under threat.

LCH, Europe’s biggest clearinghouse, “is entitled to take the monies that it needs in terms of the margin” where MF Global’s U.K. business suffered losses, Gabriel Moss, the company’s lawyer, said at a court hearing yesterday.

The U.S. brokerage’s trustee, James Giddens, hasn’t recognized that right. A trial is scheduled for April.

The trustee’s claim “would in effect deprive the clearinghouses of some or all of their title to the T-bills,” Judge David Richards said. They “are entitled to be heard” as long as the trial isn’t widened or delayed.

Giddens, who is liquidating New York-based MF Global Inc., claims ownership of the about $600 million sent to London for collateral. KPMG LLP, which is winding up MF Global UK Ltd., argues Giddens should be treated as a creditor, which may mean the trustee gets less money back.

Disputes between KPMG and MF Global’s U.S. trustees have tied up about $1.1 billion of clients’ and creditors’ money and hampered the return of those assets. MF Global Holdings filed the eighth-largest U.S. bankruptcy on Oct. 31, 2011.

“Our priority remains the speedy return of assets to customers and we are hoping that issues before the court can be determined as quickly as possible,” James Acheson-Gray, a spokesman for Giddens, said in an e-mailed statement.

Rachael Harper, an LCH spokeswoman, and Claire Miller, a spokeswoman for Intercontinental Exchange Inc. (ICE:US)’s ICE Clear, declined to comment. KPMG spokeswoman Sorrelle Cooper didn’t immediately respond to an e-mail seeking comment.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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