The Work

November 1, 2011 6:16 PM

More Bankruptcy Lawyers Pulled Into MF Global Orbit

Posted by Brian Baxter

Several more Am Law 100 and leading international firms have landed roles advising various parties in connection with the collapse of commodities and derivatives broker MF Global Holdings, which sought Chapter 11 protection in New York on Monday as a result of its exposure to Europe's mounting sovereign debt problems.

Weil, Gotshal & Manges and British firm Ashurst are advising on the U.K. administration of MF Global UK and MF Global UK Services, according to U.K. publication Legal Week. The MF Global administration marks the first time since Lehman Brothers collapsed in September 2008 that the United Kingdom's new proceedings for winding down financial services firms have been tested.

The Am Law Daily reported Monday that MF Global had retained three firms as it fought to stave off insolvency, with Weil tapped to manage the restructuring of the company's overseas obligations. The U.K.'s Financial Services Authority (FSA) has appointed global accounting firm KPMG to manage a special administration regime for MF Global, whose Chapter 11 filing represents the eighth-largest bankruptcy in U.S. history.

"Against the backdrop of challenging market conditions and the euro-zone crisis, the financial position of MF Global UK has significantly deteriorated in recent weeks," said a statement by Richard Fleming, a joint special administrator and head of KPMG's U.K. restructuring unit. "Following the filing for Chapter 11 by MF Global Holdings USA Inc., it would not be viable to operate MF Global UK Ltd on a stand-alone basis."

Two former Jones Day restructuring partners lured away from the firm's London office this year are leading a Weil team representing KPMG on the administration of MF Global's U.K. units. London-based restructuring head Adam Plainer, who left Jones Day for Weil in January, and restructuring partner Paul Bromfield, who made the leap in September, are advising KPMG, Legal Week reports.

"This is a truly groundbreaking case as it is the first time the new special administration regime has been used," Plainer told Legal Week. "The administrators will be working closely with the FSA who have extensive powers under the new legislation."

Other Weil partners working on the matter include London office managing partner Michael Francies, finance and restructuring partner Dominic McCahill, and structured finance and derivatives partner Steven Ong. Legal Week reports that barristers Martin Pascoe, Daniel Bayfield, and Glen Davis from London-based South Square are advising both KPMG and the FSA on the U.K. administration of MF Global.

The FSA, meanwhile, has turned to an Ashurst team for advice on managing the MF Global administration. The Ashurst team includes London-based litigation chief Edward Sparrow, restructuring and insolvency partner Giles Boothman, and regulatory partner Rob Moulton. Legal Week reports that the new special administration rules, which went into effect in February, will determine whether MF Global's U.K. units can continue as a going concern or will be liquidated in order to return assets to clients and creditors.

MF Global's many creditors have also begun to line up outside law firms, including Simpson Thacher & Bartlett and Kirkland & Ellis.

Bloomberg reported Tuesday that JPMorgan Chase is seeking a lien on all of MF Global's assets and could place a lien on the company's operating account balance of $26.6 million. JPMorgan, which holds more than $1.2 billion in MF Global bond debt, is listed as the company's largest unsecured creditor. In its bankruptcy court filings, MF Global listed assets of $41 billion against potential liabilities of $39.7 billion.

According to a notice of objection filed by JPMorgan on Tuesday, the nation's largest bank is being represented by Simpson Thacher bankruptcy practice head Peter Pantaleo, restructuring partner Sandeep Qusba, and counsel Morris Massel. JPMorgan is a longtime Simpson Thacher client.

A source familiar with the legal maneuvering surrounding MF Global's bankruptcy filing confirmed to The Am Law Daily that Kirkland is advising various creditors of the bankrupt brokerage. A Kirkland spokeswoman declined to comment.

The Am Law Daily reported Monday that Skadden, Arps, Slate, Meagher & Flom restructuring partners Kenneth Ziman, J. Gregory Milmoe, J. Eric Ivester, and George Panagakis are advising MF Global on its Chapter 11 filing. (Ziman said during a bankruptcy court hearing Tuesday that Skadden had received a $500,000 retainer from MF Global, according to The New York Times.) Sullivan & Cromwell bankruptcy partner Andrew Dietderich is also advising the debtor.

In the United States, new banking regulations under the Dodd-Frank financial reform bill could not save MF Global, because the mechanisms themselves aren't yet in place and because they weren't designed to help a failing brokerage like MF Global. MF Global was essentially determined to be small enough to fail, according to sibling publication Corporate Counsel.

MF Global's general counsel, Laurie Ferber, is a former Skadden associate who spent more than two decades at Goldman Sachs. MF Global chairman and CEO Jon Corzine previously served as CEO of Goldman until 1999, when he lost a power struggle with future U.S. treasury secretary Hank Paulson. Corzine went on to a career in politics, serving as a U.S. senator and governor for New Jersey until losing a gubernatorial reelection bid in 2009.

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