LONDON, March 20 (Reuters) - MF Global's European administrator KPMG expects litigation to delay pay-outs to clients of the collapsed broker, after a landmark court ruling last month on the far larger bankruptcy of Lehman Brothers.
Britain's Supreme Court said late last month Lehman clients whose cash the U.S. investment bank had mixed with its own have the same rights as clients whose cash was kept separately or "segregated."
"We now have a bit more certainty but there are still lots of grey areas and it looks likely a lot of the issues are going to need to be resolved by the court," said Richard Heis, special administrator to MF Global.
The Supreme Court ruling is good news for clients with their money in non-segregated accounts, but effectively means a lower pay-out for segregated account holders, for whom it had always been clear that they could claim their money back.
Financial firms are required to keep money they trade on clients' behalf separately from their own in segregated accounts. Last month's court ruling said Lehman Brothers had failed to do this "on a spectacular scale."
KPMG is working to retrieve the $2.7 billion (1.8 billion pounds) of MF Global client and creditor cash outstanding when the broker collapsed in October last year.
The administrator has until now been cautious about pledging cash to clients, pending the Lehman ruling.
It has so far promised to make interim payments worth 26 cents on the dollar and made its first settlement last month, when it distributed $31 million among nearly 2,000 MF Global clients.
"We hope to update the market on the formal distribution plan of assets and the remodelling of distributions post-the Lehman ruling in the new few weeks," Heis said.
"The total reclaimed on behalf of creditors (ie non-segregated cash) has topped 500 million dollars, while we continue to chase more than another $1 billion," said Heis, which included both client and creditor money.
The administrator has so far recovered the $1 billion of client assets held in segregated accounts, but the remaining $200 million from non-segregated accounts is proving elusive.
KPMG last week published a list of some 2,500 MF Global creditors on its website, including the individual amounts they are owed and their addresses, in accordance with a legal requirement.
But it withdrew the list a day later following an "individual's claim of personal threat".