Elliott Management sells MF Global stake-source

Tue Jul 3, 2012 3:52am IST

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* Hedge fund resigns from MF Global creditors' committee

* Move comes after Elliott sold its position in MF Global - source

* Replaced on committee by grain company

By Nick Brown

July 2 (Reuters) - Paul Singer's Elliott Management has resigned from a committee of MF Global Holdings Ltd creditors after selling its position in the bankrupt commodities broker, according to a source close to the matter.

U.S. Trustee Tracy Hope Davis, a regulator charged with ensuring compliance with bankruptcy laws, on Monday filed court papers revealing Elliott had been replaced on the committee with Nebraska-based grain company JE Meuret Grain Co Inc.

The change came after Elliott sold its position in MF Global and resigned from the committee, said the source, who declined to be named because the information was not public.

Creditors of bankrupt companies often sell their claims at a discount to escape the bankruptcy payout process, which can take years. Buyers of such claims, meanwhile, hope the bankruptcy process will yield higher payouts than what they paid for the claims.

Elliott's resignation indicates an active market for claims against MF Global, despite uncertainty over whether the MF estate holds enough value to provide significant returns to creditors.

Elliott, a roughly $20 billion fund, invests largely in distressed or bankrupt assets, and may itself have acquired its MF Global positions on the secondary market. The size and nature of its positions, however, have not been disclosed in court papers, other than being broadly categorized as either bank debt, stocks, bonds, or derivatives.

A spokesman for Elliott declined to comment on Monday.

Last year, Elliott led a successful charge to gain permission from the judge overseeing MF Global's bankruptcy to continue to buy and sell MF Global positions while serving on the committee. Judge Martin Glenn granted the request, provided committee members take steps to avoid conflicts of interest by separating trading operations from committee activities.

Calls to JE Meuret were not returned.

Resignation from creditors' committees is not common in bankruptcy. Such committees represent the interest of all unsecured creditors in a bankruptcy.

Elliott was named to MF Global's creditors' committee in November, along with Caplin Systems, Wilmington Trust Co, Bank of America and JPMorgan Chase & Co, the agent for MF's $1.2 billion credit line.

MF Global went bankrupt in October after its exposure to European debt spooked investors. Trustees have been appointed to liquidate the MF Global and its broker-dealer unit, and are combing through its messy capital structure in hopes of finding value to reimburse creditors and trader customers still missing billions of dollars.

The case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

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