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Barclays, Seaport eye bulk buys of MF Global claims
NEW YORK/BOCA RATON |
NEW YORK/BOCA RATON (Reuters) - Barclays PLC (BARC.L) and the Seaport Group have separately begun working to group together thousands of MF Global customer claims with an eye toward acquiring the claims in bulk, according to an attorney, and to a term sheet obtained by Reuters.
Barclays and Seaport, which have been in talks with customer groups to acquire claims at more than 90 cents on the dollar, are looking at ways to bundle smaller claims to make bigger bulk purchases, according to a term sheet from customer advocate group the Commodity Customer Coalition.
The coalition, which negotiated the offers, sent the term sheet to thousands of customer constituents this week, saying offers from Seaport and Barclays were contingent on the size of the claim.
Seaport has said it will only take on claims worth $100,000 or more, according to the sheet.
Trace Schmeltz, an attorney for the coalition, told Reuters on Thursday his firm, Barnes & Thornburg, will work with Seaport to find ways to bundle.
"They asked if we'd do it, and we have a team in place to help them," Schmeltz said.
Meanwhile, Barclays this week cold-called R.J. O'Brien, the futures broker with the most former MF Global clients, to seek the firm's help in reaching potential sellers.
"They asked to have a meeting with us to share with us the plan that they have in mind," the broker's chief executive, Gerald Corcoran, told Reuters at the Futures Industry Association's annual meeting in Boca Raton, Florida, on Tuesday. "If we can do it, we will facilitate" communication between Barclays and customers interested in selling their claims, Corcoran said.
Some $1.6 billion of customer funds originally parked with MF Global went missing after the broker's failure last October. James Giddens, the trustee charged with recovering client funds, has paid back about 72 percent of the money in commodity trading accounts.
Customers with foreign exchange claims have so far received nothing from the trustee.
More than 27,000 clients have filed claims with the trustee to retrieve the balance in their accounts, and it is these claims Barclays and others are after.
A spokesperson for Seaport did not return a call seeking comment. A Barclays spokesman declined to comment.
According to the coalition's term sheet, Seaport has offered 91.25 cents on the dollar to acquire claims for customers who traded on U.S. exchanges, and 66.25 cents for claims belonging to customers who traded on foreign exchanges.
Barclays has offered 91 cents and 66 cents, respectively, for U.S. exchange and foreign exchange claims belonging to institutions. It has offered 90 cents and 65 cents, respectively, for U.S. exchange and foreign exchange claims belonging to individuals.
Royal Bank of Scotland (RBS.L) has made an offer for institutional accounts equal to Barclays', but the coalition is not touting RBS' offer to customers because the bank refused to take on individual accounts, according to the sheet.
A spokesperson for RBS could not be immediately reached on Thursday.
At least one claims trader believes the offers are above market value for customer claims on the U.S. exchange side.
Brian Coppola, vice president at Fulcrum Capital, which has acquired more than $155 million worth of MF Global claims, said his group has generally been paying in the range of 87-90 cents on the dollar.
Larger or grouped claims, he said, fetch higher prices because they are more attractive to banks. Such claims are less risky, and they avoid the stigma sometimes associated with banks seen as preying on individual investors, Coppola said.
But they also make for tricky contractual terms that can complicate sale deals, he said.
"You could see a standard-form contract, really more like a loan, where, if anything goes wrong, for instance if claims are reclassified, there are clawbacks and holdbacks and out-clauses," Coppola said.
A coalition spokesman said his group does not endorse any particular deal, but wants to give customers an idea of their options.
"We think there will be higher recoveries than this, but we just wanted people to know they have an avenue to access their capital more quickly if they need to," spokesman John Roe said.
Roe declined to comment on the information in the term sheet itself.
Earlier on Thursday, James Giddens, the trustee in charge of recovering money for customers of MF Global's broker-dealer unit, announced a proposal to pay back an additional $600 million to customers of U.S. exchanges and $50 million to customers of foreign exchanges.
The plan, which requires court approval, would add to roughly $3.9 billion already paid out to U.S. exchange customers, equal to about 72 percent of the value of their accounts.
Roe said he hopes the proposal serves to boost the market for customer claims.
"I hope it increases the bids that are out there, so people can get their money more quickly," he said.
The bankruptcy is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.
The brokerage liquidation is In re MF Global Inc, in the same court, No. 11-2790.
(Reporting By Nick Brown in New York and Ann Saphir in Chicago; Editing by Phil Berlowitz)
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