Distressed Debt: Aurelius Joins J.P. Morgan In MF Global Case

Aurelius Capital Management has joined the motion to allow JP Morgan to prosecute in order to resolve a claim over a portion of MF Global's $1.2 billion revolver, according to a filing today.  According to court documents, Aurelius is a lender under the ~$1.2 billion Liquidity Facility.

On Feb. 13, JPMorgan (JPM), as administrative agent and as a lender to MF Global motioned to prosecute or settle an issue regarding at least $928 million of the revolver facility that was transferred to a unit of the company referred to as MF Global Finance, or Finco, just before the bankruptcy of MF Global in October 2011.

In the Feb 13. motion, JPM points out by avoiding the $928 million of the HoldCo's intercompany claims (and subordinating the claim of Holdco vs Finco), recoveries to Finco could increase substantially. The current proposed plan allows the intercompany claim in full against Finco (a double dip) but language on whether an offsetting claim from Finco to Holdco is uncertain at best. As background, Finco drew down on the Amended Liquidity Facility in the two weeks prior to MF Global's bankruptcy.

The plan currently proposed was signed by co-proponents including Silver Point Capital, Knighthead Capital and Cyrus Capital Partners, along with Caspian Capital, Citigroup, Deutsche Bank, BlueMountain Capital, P Schoenfeld Asset Management, Scogging Capital, Serengeti Asset management and RBS, Waterstone Capital in conjunction with trustee Louis Freeh, according to the filing.

These creditors asked the court to postpone the hearing on the motion. Aurelius' counsel submitted that such request should be denied because the group represents competing interests, as they have claims in the company's other notes in addition to the revolver, according to the motion
Unlike the creditor co-proponents, Aurelius only holds claims in these Chapter 11 cases under the Liquidity Facility, according to Aurelius' counsel's statement.

By the same logic, Aurelius feels JPMorgan is the "best and most appropriate party to prosecute these claims and defenses because" it is not a fiduciary for multiple estates or creditors.

Attorneys representing JP Morgan at Simpson Thacher and Aurelius at Stutman Trester & Glatt declined to comment further than on what was in the filing. - Max Frumes


Ross 2/26/2013  

Any insight on whether this will impact funds available for remaining distributions to customer account holders?

Anonymous,  2/27/2013  

so what is the news here mr. distressed investing?


hunter [at] distressed-debt-investing [dot] com

About Me

I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.