October 31, 2011 4:16 PM
Skadden, S&C, Weil, and Hughes Hubbard Land Key MF Global Roles
Posted by Brian Baxter
UPDATE: 11/1/11, 11:15 a.m., EDT. The CFTC and the operator for the Chicago Mercantile Exchange have released a statement accusing MF Global of misusing customers' money by mixing it with the company's own funds. Click here for MF Global's legal structure.
Skadden, Arps, Slate, Meagher, & Flom, Sullivan & Cromwell, and Weil, Gotshal & Manges are playing key advisory roles on Monday's Chapter 11 filing by commodities and financial derivatives broker MF Global Holdings. Eight firms, including S&C and Wachtell, Lipton, Rosen & Katz, appear on a list of the brokerage's largest unsecured creditors.
MF Global, a holding company that filed for bankruptcy in Manhattan along with its main finance unit, lists debts of almost $39.7 billion against assets of more than $41 billion. The filing is the eighth-largest bankruptcy in U.S. history, according to data analyzed by The Wall Street Journal's Deal Journal, and makes MF Global the first U.S. casualty of the European sovereign debt crisis, according to The New York Times. Until the Federal Reserve Bank of New York suspended its designation as a primary dealer Monday, MF Global executed trades on more than 70 global stock exchanges for client companies, hedge funds, asset managers, and institutional and individual investors.
Former Goldman Sachs CEO Jon Corzine took the helm at MF Global in March 2010 after losing a reelection campaign to serve a second term as governor of New Jersey. Reuters reports that Corzine believed he could turn around MF Global—which posted a series of quarterly losses prior to his arrival—by aggressively trading on the sovereign debt of nations within the troubled euro zone. But a complex deal to save the euro reached by European Union leaders last week forced private creditors to eat a greater share of the losses stemming from the union's debt crisis.
The settlement had disastrous ramifications for MF Global's positions on the sovereign debt of such countries as Ireland, Italy, Portugal, and Spain, all of whose bonds the brokerage had purchased with the expectation that they would regain their value. The same bonds began trading at distressed levels after private creditors were forced to take losses on European debt, leading MF Global to post record losses and draw down its credit lines last week while pursuing the sale of its retail futures brokerage unit to raise additional capital.
Skadden corporate restructuring partners Kenneth Ziman, J. Gregory Milmoe, J. Eric Ivester, and George Panagakis are advising MF Global on the Chapter 11 filing. MF Global's general counsel, Laurie Ferber, is a former Skadden associate who spent more than two decades at Goldman Sachs before becoming the brokerage's top in-house lawyer in June 2009 upon the retirement of predecessor Howard Schneider.
MF Global is a onetime subsidiary of British alternative asset manager Man Group built, in part, from the regulated futures business Man Group acquired for $323 million from defunct derivatives broker Refco at a bankruptcy auction in November 2005. In naming Skadden's Milmoe a Dealmaker of the Year in 2007, The American Lawyer noted his role advising on the orderly sale of Refco's assets.
London-based Man Group spun off its brokerage business as MF Global through a $2.92 billion initial public offering in July 2007. A team of lawyers from Fried, Frank, Harris, Shriver & Jacobson represented underwriters on that IPO, while Sullivan & Cromwell represented MF Global, according to SEC filings. Subsequent regulatory filings by MF Global show that S&C has continued to enjoy a close relationship with the brokerage.
S&C's Web site lists MF Global as a regular client of David Harms, the cohead of the firm's general practice group and coordinator of its broker-dealer regulation practice. While Harms did not respond to a request for comment, a source knowledgeable about MF Global's increasingly tenuous financial situation confirmed to The Am Law Daily that the firm has been providing M&A and restructuring advice to the ailing New York–based company.
In a recent interview with Bloomberg TV, S&C senior chairman H. Rodgin Cohen called the European debt deal, which helped hasten MF Global's bankruptcy filing, a fair agreement. According to a list of MF Global's 50 largest unsecured creditors, the brokerage owes almost $1.6 million to at least eight law firms, with S&C leading the way at $596,939. Wachtell, which represented MF Global in August on a $90 million settlement with investors over risk management procedures at the brokerage, is owed $388,000. Wachtell was also among the firms that donated the most to Corzine's gubernatorial reelection campaign, according to our previous reports.
Other firms appearing on MF Global's creditors' list are Magic Circle firm Linklaters ($348,000), Shearman & Sterling ($135,500), Holland & Knight ($59,000), Israeli firm GKH Law Offices ($30,074), Paul Hastings ($11,646), and Fox Rothschild ($11,645). An MF Global spokeswoman did not respond to a request for comment on money owed to the company's outside law firms.
Weil has been retained to advise an MF Global unit based in London on the restructuring of its overseas operations, according to reports by Bloomberg, The Wall Street Journal, and Financial Times. A Weil spokeswoman did not immediately respond to a request for information on the names of the lead lawyers from the firm working on the matter.
The Securities Investor Protection Corporation announced Monday that it has appointed Hughes Hubbard & Reed bankruptcy and corporate reorganization cochair James Giddens, Jr., as liquidating trustee for MF Global's brokerage, which was not included in the Chapter 11 filing by the holding company. Giddens is also serving as the liquidating trustee for Lehman Brothers's broker-dealer unit. Hughes Hubbard has reaped nearly $170 million through its work advising Giddens in that matter, according to recent news reports.
In a statement of its own, the Commodity Futures Trading Commission announced that it and the SEC "have determined that a SIPC–led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets."Make a comment