On November 29, 2011, AMR Corporation, the parent company of American Airlines and American Eagle, and certain of its U.S.-based subsidiaries (including American and American Eagle) filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. We took this action in order to achieve a cost and debt structure that is industry competitive and thereby assure our long-term viability and ability to continue delivering a world-class travel experience for customers.
American Airlines and American Eagle are operating normal flight schedules, and its reservations, customer service, AAdvantage program, Admirals Clubs and all other operations are conducting business as usual. Likewise, throughout the Chapter 11 process, the Debtors expect to continue to:
* Provide safe and reliable service;
* Fly normal schedules;
* Honor tickets and reservations, and make exchanges and refunds as usual;
* Fully maintain our AAdvantage frequent - flyer and other customer service programs, and ensure all AAdvantage miles and elites status earned by members remain secure and intact;
* Provide Admirals Club access and similar amenities to members and eligible customers;
* Remain an integral member of the oneworld alliance, of which American is a founding member, and continue our codeshare partnerships;
* Provide employee wages, healthcare coverage, vacation, and other benefits, without interruption;
* Pay suppliers for goods and services received during the reorganization process.
These filings have no direct legal impact on American's operations outside the United States.
American is committed to continuing to provide our customers with the excellent service and safe, reliable travel experience they expect from us.
Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding
undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/ or 215/945-7000)
To receive AMERICAN AIRLINES BANKRUPTCY NEWS, please call or send e-mail to:
Bankruptcy Creditors' Service, Inc.
572 Fernwood Lane
Fairless Hills, PA 19030
Telephone: (215) 945-7000
Facsimile: (215) 945-7001
E-mail: peter@bankrupt.com
Tuesday, November 29, 2011
Tuesday, November 8, 2011
MF Global Bankruptcy News, Issue No. 1 -- FREE COPY
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MF GLOBAL BANKRUPTCY NEWS Issue Number 1
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Copyright 2011 (ISSN XXXX-XXXX) November 3, 2011
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Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001
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MF GLOBAL BANKRUPTCY NEWS is published by Bankruptcy Creditors'
Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania
19030, on an ad hoc basis (generally every 10 to 20 days) as
significant activity occurs in the Debtors' cases. New issues are
prepared by Michille P. Deiparine, Neil U. Lim, Psyche A.
Castillon and Peter A. Chapman, Editors. Subscription rate is
US$45 per issue. Any re-mailing of MF GLOBAL BANKRUPTCY NEWS is
prohibited.
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IN THIS ISSUE
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[00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS
[00001] BACKGROUND & DESCRIPTION OF MF GLOBAL
[00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011
[00003] MF GLOBAL'S CHAPTER 11 DATABASE
[00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS
[00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK
[00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
[00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE
[00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING
[00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK
[00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D'
[00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2'
[00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2'
[00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS
KEY DATE CALENDAR
-----------------
10/31/11 Voluntary Chapter 11 Petition Date
11/01/11 3:00 P.M. First Day Hearing before Judge Glenn
11/30/11 Deadline to Provide Utilities with Adequate Assurance
12/14/11 Deadline to File Schedules of Assets and Liabilities
12/14/11 Deadline to File Statement of Financial Affairs
12/14/11 Deadline to File Lists of Contracts and Leases
01/29/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027
02/28/12 Expiration of Debtors' Exclusive Plan Proposal Period
02/28/12 Deadline to Make Decisions About Lease Dispositions
04/28/12 Expiration of Debtors' Exclusive Solicitation Period
10/30/13 Deadline for Debtors' Commencement of Avoidance Actions
Organizational Meeting to Form Creditors' Committees
First Meeting of Creditors under 11 USC Sec. 341
Bar Date for filing Proofs of Claim
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[00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS
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MF GLOBAL BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited.
Distribution to multiple individuals at the same firm is provided
at no additional charge; folks outside of your firm should set-up
and pay for their own subscriptions. Subscriptions may be
canceled at any time without further obligation.
To continue receiving MF GLOBAL BANKRUPTCY NEWS, please complete
the form below and return it by fax or e-mail to:
Bankruptcy Creditors' Service, Inc.
572 Fernwood Lane
Fairless Hills, PA 19030
Telephone: (215) 945-7000
Facsimile: (215) 945-7001
E-mail: peter@bankrupt.com
We have published similar newsletters tracking billion-dollar
insolvency proceedings since 1990, starting with Federated
Department Stores. Currently, we provide similar coverage about
the restructuring proceedings involving Lehman Brothers Holdings,
Inc., Bear Stearns Co.'s High-Grade Structured Credit Strategies
Master Fund, Ltd., and High-Grade Structured Credit Strategies
Enhanced Leverage Master Fund, Ltd., Refco, Inc., Borders Group,
Fontainebleau Las Vegas Holdings, LLC, Station Casinos, Inc.,
Tropicana Entertainment, LLC, General Growth Properties, Inc.,
Mesa Air, Inc., Delta Air Lines, US Airways, Owens Corning, Exide
Technologies, W.R. Grace & Co., Delphi Corp., Tribune Company,
Ambac Financial Group, Inc., National Century Financial
Enterprises, Enron Corp., Parmalat Finanziaria, S.p.A., and the
Roman Catholic Church in the United States.
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(Distribution to multiple professionals at the
same firm is provided at no additional cost.)
MF GLOBAL BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited.
Distribution to multiple individuals at the same firm is provided
at no additional charge; folks outside of your firm should set-up
and pay for their own subscriptions. Subscriptions may be
canceled at any time without further obligation.
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[00001] BACKGROUND & DESCRIPTION OF MF GLOBAL
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MF Global Holdings Ltd.
717 Fifth Avenue
New York, NY 10022
Tel: (212) 589-6200
http://www.mfglobal.com/
MF Global Holdings Ltd. (NYSE: MF) is one of the world's leading
brokers of commodities and listed derivatives. MF Global provides
access to more than 70 exchanges around the world. The company is
also an active broker-dealer in markets for commodities, fixed
income securities, equities, and foreign exchange. As of Oct. 30,
2011, MF Global is one of 20 primary dealers authorized to trade
U.S. government securities with the Federal Reserve Bank of New
York. In addition to executing client transactions, MF Global
provides research and market commentary to help clients make
trading decisions, as well as providing clearing and settlement
services. The Company is also active in providing client
financing and securities lending services.
MF Global's roots go back nearly 230 years to a sugar brokerage on
the banks of the Thames River in London.
MF Global is headquartered in the United States, and has
operations globally, including the United Kingdom, Australia,
Singapore, India, Canada, Hong Kong, and Japan. The Company's
priority is serving the needs of its diversified global client
base, which includes a wide range of institutional asset managers
and hedge funds, professional traders, corporations, sovereign
entities, and financial institutions. The Company also offers a
range of services for individual traders and introducing brokers.
MF Global has roughly 2,870 employees worldwide, 13 of which are
employed by the Debtors in the United States. MF Global derives
revenues from three main sources: (a) commissions generated from
execution and clearing services; (b) principal transactions
revenue, generated both from client facilitation and proprietary
activities; and (c) net interest income from cash balances in
client accounts maintained to meet margin requirements, as well as
interest related to MF Global's collateralized financing
arrangements and principal transactions activities. For fiscal
2011, MF Global generated total revenues of roughly $2.2 billion,
revenues net of interest and transaction-based expenses of roughly
$1.1 billion, and incurred net loss attributable to MF Holdings,
the ultimate parent company, of $81.2 million.
Product Offerings
MF Global provides execution services for five broad categories of
products: commodities, equities, fixed income, foreign exchange,
and listed futures and options.
Many of the contracts and securities that MF Global trades are
listed on exchanges, while others are traded over-the-counter.
The Company executes orders for its clients on either an agency or
principal basis.
A. Commodities
MF Global provides clients execution services for transactions
relating to derivative contracts, including futures, options,
forward sale agreements and other types of instruments based on
the price of metals and industrial materials. Metal derivatives
are traded on exchanges and in the OTC markets. MF Global is one
of 12 designated ring-dealing members of the world's largest
metals exchange, the London Metal Exchange.
MF Global also executes trades in the energy derivatives market,
including futures, options, swaps, and forwards on a range of
energy products, including crude oil, natural gas, heating oil,
gasoline, propane, electricity and other energy commodities. MF
Global is an active market participant in both exchange-listed and
OTC-traded energy derivatives, and has been consistently ranked as
one of the leading providers by volume of clearing and execution
services on both the New York Mercantile Exchange and ICE Futures
Europe.
MF Global also delivers its clients targeted hedging and risk
management solutions and helps clients locate trading
opportunities in a broad array of agricultural commodities
markets. MF Global provides trade execution services for a wide
range of OTC and listed agricultural commodities markets,
including the grain and oilseed futures and options markets and
for soft commodities, such as coffee, cocoa, and sugar, on
exchanges in North America, Europe and Asia Pacific.
B. Equities
MF Global provides execution services in both cash equities and
equity derivative products around the globe. Equity derivative
products include futures, ETFs, options (single stock, index and
ETF), contracts for difference (where legally available), and
other securities whose underlying value is related to the price of
one or more stocks, a basket of stocks, or stock indices.
Recently, MF Global expanded its global cash equity, equity
derivatives, portfolio trading, and electronic trading services
teams to provide improved service for its clients in a variety of
major markets around the world.
C. Fixed Income
MF Global provides execution services for a variety of fixed
income products. These include U.S. Treasury and agency
securities and bonds issued by European governments and by
multinational institutions. The Company also trades corporate
bonds, mortgage-backed and asset-backed securities, emerging
market securities, as well as credit default swaps and interest
rate swaps. MF Global has been designated as a primary leader of
U.S. treasury securities, enabling it to serve as a counterparty
to the Federal Reserve Bank of New York in open-market operations,
and participate directly in U.S. Treasury auctions. MF Global
also provides analysis and market intelligence to the Federal
Reserve's trading desks and to its clients.
D. Foreign Exchange
MF Global delivers access to a range of products and trading
opportunities in the foreign exchange markets worldwide. Many of
these foreign exchange transactions are undertaken by MF Global's
clients in connection with the purchase or sale of other
instruments. Most foreign exchanges are conducted on an OTC
basis.
E. Futures and Options
MF Global provides execution services for listed futures and
options, including interest rate, government bond, and index
futures and options. MF Global's floor brokers offer clients
access to traditional floor execution for futures and options that
continue to have price discovery on trading floors. Where futures
and options have moved to electronic trading platforms, MF Global
provides extensive electronic connectivity to global markets.
Service Offerings
In addition to executing client transactions, MF Global provides
clearing services, which are a critical component of the futures
and options business, as well as a range of services designed to
assist clients in developing trading ideas and managing their
trading portfolios.
A. Clearing and Financing
MF Global provides a number of prime services, including clearing
and settlement of trades, client financing, securities lending,
and a range of administrative services. The revenue MF Global
earns from prime services activities consists of commissions,
interest income on client custodial accounts, principal
transactions and fees. In addition to the clearing transactions
the Company executes for its own clients, the Company also clears
transactions for clients that are using other executing brokers or
executing their orders directly on an exchange. Moreover, MF
Global has developed a substantial business in clearing
transactions on behalf of other brokers.
B. Research and Market Commentary
MF Global offers a broad array of market research, analysis, and
commentaries that provide clients with actionable insights they
can use to inform their trading strategies and investment
decisions. MF Global's proprietary offerings include research on
a wide range of instruments, markets and industries, equity
research on many of the world's largest companies and industry
sectors, policy-focused research on U.S. legislative and
regulatory topics, and analysis of macroeconomic trends and issues
driving financial markets.
Regulation and Exchange Memberships
MF Global's business activities are extensively regulated by a
number of U.S. and foreign regulatory agencies and exchanges.
These regulatory bodies and exchanges are charged with protecting
investors by imposing requirements relating typically to capital
adequacy, licensing of personnel, conduct of business, protection
of client assets, record-keeping, trade-reporting and other
matters. They have broad powers to monitor compliance and punish
non-compliance. If MF Global fails to comply with applicable
regulations, it may be subject to censure, fines, cease-and-desist
orders, suspension of its business, removal of personnel, civil
and criminal litigation, revocation of operating licenses or other
sanctions.
In the United States, MF Global is principally regulated in the
futures markets by the Commodity Futures Trading Commission, the
Chicago Mercantile Exchange, and the National Futures Association
and in the securities markets by the Securities and Exchange
Commission, the Financial Industry Regulatory Authority, and the
Chicago Board Options Exchange. Among other things, the CFTC,
SEC, FSA and other U.S. and non-U.S. regulators require MF Global
to maintain specific minimum levels of regulatory capital in MF
Global's operating subsidiaries that conduct its futures and
securities business. Further, as participants in the financial
services industry, MF Global's business must comply with the anti-
money laundering laws of the jurisdictions in which MF Global does
business, including, in the U.S., the USA PATRIOT Act, which
requires the Company to know certain information about its clients
and to monitor their transactions for suspicious activities, as
well as the laws of the various states in which the Company does
business or where the accounts with which the Company does
business reside. MF Global's business is also subject to rules
promulgated by the U.S. Office of Foreign Assets Control, which
requires that MF Global refrain from doing business, or allow its
clients to do business through it, in certain countries or with
certain organizations or individuals on a prohibited list
maintained by the U.S. government.
PREPETITION INDEBTEDNESS
As of Sept. 30, MF Global and its subsidiaries had $41,046,594,000
in total assets and $39,683,915,000 in total liabilities.
A. Liquidity Facility Agreement
The Company owed JPMorgan Chase Bank, N.A., as administrative
agent, and several lenders pursuant to a five-year revolving
credit facility dated as of June 15, 2007, the aggregate principal
amount of roughly $1.2 billion, $1.172 billion of which was drawn
as of the Oct. 31, 2011.
The Liquidity Facility permits the Company, in addition to certain
of its subsidiaries, to borrow funds under the Liquidity Facility
until June 15, 2014. Roughly $689.6 million is available for
borrowing until the Maturity Date, and roughly $511.3 million is
available for borrowing until June 15, 2012.
The Liquidity Facility includes a covenant requiring the Company
to maintain a minimum Consolidated Tangible Net Worth of not less
than the sum of (a) 75% of the pro forma Consolidated Tangible Net
Worth as of March 31, 2010, after giving effect to the offering by
the Company of equity interests on June 2, 2010, including
exercise of the underwriters' option to purchase additional
shares, and the consummation in whole or in part of the offer to
exchange of the Company dated June 1, 2010, plus
(b) 50% of the net cash proceeds of any offering by the Company of
equity interests consummated after the second amendment effective
date plus (c) 25% of cumulative net income for each completed
fiscal year of the Company after the second amendment effective
date for which consolidated net income is positive.
The Liquidity Facility also requires the Company to limit its
consolidated capitalization ratio to be no greater than 37.5% on
or after March 31, 2011, and before March 31, 2012; and 35% on or
after March 31, 2012.
B. Secured Facility to MF Global Inc.
On June 29, 2011, the Company's U.S. regulated broker-dealer
subsidiary, MF Global Inc., entered into a $300 million 364-day
secured revolving credit facility with a syndicate of lenders of
which MFGI has borrowed roughly $210 million as of Oct. 31, 2011.
JPMorgan Chase Bank, N.A., who serves as the Liquidity Facility
Agent, is also the Administrative Agent and a lender under the
MFGI Secured Facility. The other lenders are:
* Harris, N.A.,
* Bank of America, N.A.,
* Citibank, N.A.,
* Goldman Sachs Bank USA,
* Deutsche AG New York Branch,
* The Bank of New York Mellon,
* Commonwealth Bank of Australia,
* Standard Chartered Bank, and
* U.S. Bank National Association.
JPMorgan Securities LLC, BMO Capital Markets, Citigroup Global
Markets Inc., and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, serve as Joint Lead Arrangers and Joint Bookrunners
under the facility.
The MFGI Secured Facility is secured by eligible collateral owned
by MFGI. MF Holdings and MF Finance have provided unsecured
guarantees under the facility. The MFGI Secured Facility includes
a covenant requiring MFGI's consolidated tangible net worth at any
time not to be less than $227.3 million.
C. Unsecured Convertible Notes
MF Global Holdings Ltd.'s outstanding notes are:
Outstanding
Title Principal Amount
----- ----------------
1.875% Notes due February 1, 2016 $287,500,000
6.250% Notes due August 8, 2016 $325,000,000
3.375% Notes due August 1, 2018 $325,000,000
9% Notes due June 20, 2038 $78,617,000
The 1.875% Convertible Notes are payable semi-annually in arrears
on February 15 and August 1 of each year, since August 1, 2011.
Holders may convert the 1.875% Convertible Notes at their option
prior to August 1, 2015 upon the occurrence of certain events
relating to the price of its common stock or various corporate
events.
The 9% Convertible Notes are payable semi-annually in arrears on
June 15 and December 15 of each year. Holders may convert the 9%
Convertible Notes at their option at any time prior to the
maturity date. Upon conversion, the Company will pay or deliver,
as the case may be, cash, common stock or a combination thereof at
the Company's election. The initial conversion rate for the 9%
Convertible Notes is 95.6938 shares of Common Stock per
$1 principal amount of 9% Convertible Notes, equivalent to an
initial conversion price of approximately $10.45 per share of
common stock. The conversion rate will be subject to adjustment
in certain events.
In July 2011, the Company raised $325 million in aggregate
principal amount of 3.375% Convertible Senior Notes due 2018. In
August 2011, the Company also launched and priced its first senior
unsecured debt offering, issuing $325,000,000 in five-year 6.25%
senior notes. The Company used a portion of the net proceeds of
these offerings to repurchase a portion of its existing 9%
Convertible Notes, repaid a portion of its outstanding permanent
indebtedness under its Liquidity Facility and used the remainder
for general corporate purposes.
As of June 30, 2011, there were 1,500,000 shares of Series A
Preferred Stock in MF Holdings issued and outstanding to J.C.
Flowers. Also as of June 30, 2011, 403,550 shares of Series B
Preferred Stock remain outstanding.
EVENTS LEADING TO CHAPTER 11 FILING
As a global financial services firm, MF Global is materially
affected by conditions in the global financial markets and
worldwide economic conditions, Bradley I. Abelow, president and
chief operating officer of MF Global Holdings Ltd., related.
On September 1, 2011, MF Holdings said the FINRA informed it that
its regulated U.S. operating subsidiary, MFGI, was required to
modify its capital treatment of certain repurchase transactions to
maturity collateralized with European sovereign debt and thus
increase its required net capital pursuant to Rule 15c3-1 of the
U.S. Securities and Exchange Act. MFGI increased its required net
capital to comply with FINRA's requirement.
On October 24, 2011, Moody's Investor Service downgraded its
ratings on the Company to one notch above junk status based on its
belief that MF Holdings would announce lower than expected
earnings. On October 25, 2011, MF Holdings announced its results
for its second fiscal quarter ended September 30, 2011. The
Company revealed that it posted a $191.6 million net loss in the
second quarter, compared with a loss of $94.3 million for the same
period last year. The net loss reflected a decrease in revenue
primarily due to the contraction of proprietary principal
activities. Bloomberg News noted that MF Global has lost money in
nine of the previous 11 quarters.
Dissatisfied with the September announcement by MF Holdings of
MFGI's position in European sovereign debt, FINRA demanded that MF
Holdings announce that MFGI held a long position of $6.3 billion
in a short-duration European sovereign portfolio financed to
maturity, including Belgium, Italy, Spain, Portugal and Ireland,
Mr. Abelow related. MF Holdings made the announcement on October
25. These countries, according to Mr. Abelow, have some of the
most troubled economies that use the euro. Concerns over euro-
zone sovereign debt have caused global market fluctuations in the
past months and, in particular, in the past week. These concerns
ultimately led last week to downgrades by various ratings agencies
of MF Global's ratings to "junk" status. This sparked an increase
in margin calls against MFGI, threatening overall liquidity, Mr.
Abelow said.
Concerned about the events of the past week, some of MFGI's
principal regulators -- the Commodities Futures Trading Commission
and the SEC -- expressed their grave concerns about MFGI's
viability and whether it should continue operations in the
ordinary course, Mr. Abelow related. While the Company explored a
number of strategic alternatives with respect to MFGI, no viable
alternative was available in the limited time leading up to the
regulators' deadline.
CHAPTER 11 FILING
MF Global Holdings Inc. and MF Global Finance USA Inc. filed
voluntary Chapter 11 petitions mid-morning on Oct. 31 in the U.S.
Bankruptcy Court for the Southern District of New York after a
planned sale to Interactive Brokers Group was called off.
The Wall Street Journal's Mike Spector reported that people
familiar with the matter said MF Global had a tentative deal to
sell assets to Interactive Brokers as of late Sunday, but the
agreement fell apart as talks continued overnight. Discussions
ended around 5 a.m. Monday, one of these people said, according to
the Journal.
According to WSJ's Aaron Lucchetti, Justin Baer and Mike Spector,
under the deal:
-- MF Global would file for bankruptcy as soon as Monday;
-- None of its regulated entities would file;
-- Interactive Brokers would then likely make an initial bid
of about $1 billion during a court-supervised auction,
though the source described the deal as complicated and
that number could change; and
-- The sale would need to be approved by a bankruptcy judge.
Hours before the bankruptcy filing, the Federal Reserve Bank of
New York said it has informed MF Global that it has been suspended
from conducting new business with the New York Fed. "This
suspension will continue until MF Global establishes, to the
satisfaction of the New York Fed, that MF Global is fully capable
of discharging the responsibilities set out in the New York Fed's
policy, 'Administration of Relationships with Primary Dealers,' or
until the New York Fed decides to terminate MF Global's status as
a primary dealer," according to the Fed's statement.
WSJ's Doug Cameron and Joan E. Solsman report that MF Global is
one of 22 primary dealers at the NY Fed. They also report that
Hong Kong's stock exchange said Monday that MF Global's local unit
has been "meeting its financial obligations."
NY Times' Michael J. de la Merced and Ben Protess report that one
option is for MF Global to follow a precedent set by Lehman
Brothers in 2008 by seeking bankruptcy protection for the parent
company while selling some assets to Interactive Brokers.
Bloomberg News says MF Global is getting advice from Evercore
Partners Inc. as it seeks buyers.
NY Times recalls that MF Global and Interactive Brokers share a
deal history of sorts. In 2005, both competed for assets of
Refco, which had filed for bankruptcy. MF Global emerged the
victor with a $323 million bid.
EU Crisis
WSJ and NY Times recounted MF Global's fall after making wrong
bets on sovereign bonds issued by European countries. Both
reports noted that Jon S. Corzine -- former New Jersey governor
and one-time chairman of Goldman Sachs Group Inc. -- took over as
CEO at MF Global in March 2010. He set out to change MF Global
from a midsize derivatives broker to full-fledged investment bank
that took risks with its own capital. The trades, which ballooned
over $6 billion, helped knock MF Global's own debt ratings to junk
and drained investors' confidence in the firm.
WSJ further noted the crisis began with fiscal troubles in Greece,
which just received approval from European leaders for a second
bailout. Investors fret that a number of other countries won't be
able to pay all their obligations, which has hurt the values of
sovereign bonds that Mr. Corzine purchased.
NY Times said MF Global held about $6.3 billion in bonds issued by
Italy, Spain, Belgium, Ireland and Portugal. By contrast, Morgan
Stanley disclosed in October that it had just a $2.1 billion
exposure to Europe. WSJ noted Morgan Stanley had roughly $4
billion in net exposure to debt issued by Italy and Spain and
nearly 50 times as much cash and liquidity as MF Global.
Other Potential Buyers
Bloomberg News' Matthew Leising reported that Mr. Corzine reached
out to his former firm, Goldman Sachs, about selling all or part
of the company, according to two people with knowledge of the
firm's deliberations. Goldman Sachs may be interested in
acquiring futures positions or other financial assets at the right
price, said the people, who asked not to be named because the
discussions were private.
Bloomberg also said Macquarie Group Ltd. has examined MF Global's
books, though Australia's largest investment bank wasn't working
toward getting a deal done over the weekend, according to a person
with knowledge of the situation.
Another person told Bloomberg that Barclays Plc is among banks
that have looked at MF Global. State Street Corp. is also
reported to be a potential bidder, Bloomberg said.
Bonds Fall
Bloomberg News' Matthew Leising and Zachary R. Mider reported
Saturday morning that MF Global bonds declined to as low as 35
cents on the dollar Friday after the futures broker drew on its
credit lines and Moody's Investors Service and Fitch Ratings cut
the firm's ratings to junk. Bloomberg said the company's $325
million of 6.25% bonds, issued at par in August, fell 11.9 cents
to 50 cents on the dollar as of 5:17 p.m. in New York Friday, for
a yield of 25.2%, according to Trace, the bond-price reporting
system of the Financial Industry Regulatory Authority.
Bloomberg noted that MF Global has declined 67% last week and its
bonds started trading at distressed levels as the firm seeks a
buyer for its futures brokerage to raise capital.
Moody's slashed MF Global on Oct. 24 one level to Baa3 citing the
company's struggles to earn a profit, increased risk appetite and
low interest rates. On Friday, Moody's reduced MF Global two more
steps to Ba2 and put it under review for more possible cuts.
Fitch reduced the grade to BB+, the highest junk rating, from BBB,
citing increased trading with its own capital and the challenges
of earning profits from interest in the current "low interest rate
environment."
Bloomberg noted that MF Global said the next day it had a net loss
of $191.6 million for the quarter. It has lost money in nine of
the previous 11 quarters.
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[00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011
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MF GLOBAL HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
As of Sept. 30, 2011
ASSETS
Cash and cash equivalents $603,849
Restricted cash and segregated securities 9,940,799
Securities purchased under agreements to resell 9,524,214
Securities borrowed 2,638,113
Securities received as collateral 48,979
Securities owned 14,008,167
Receivables:
Brokers, dealers and clearing organizations 3,211,270
Customers 526,444
Other 132,848
Memberships in exchanges, at cost 4,533
Furniture, equipment and leasehold improvements 161,104
Intangible assets, net 32,297
Other assets 213,977
------------
TOTAL ASSETS $41,046,594
============
LIABILITIES AND EQUITY
Short-term borrowing $731,482
Securities sold under agreements to repurchase 17,109,858
Securities loaned 1,670,615
Obligation to return securities received
as collateral 48,979
Securities sold, not yet purchased 3,698,393
Payables:
Brokers, dealers and clearing organizations 2,547,829
Customers 12,707,997
Accrued expenses and other liabilities 272,561
Long-term borrowings 896,201
------------
TOTAL LIABILITIES $39,683,915
============
Commitments and contingences
Preferred stock
1,500,000 Series A Convertible 96,167
403,550 Series B Convertible 34,446
------------
EQUITY
Common stock 165,568
Additional paid-in capital 1,632,820
Accumulated other comprehensive income (1,220)
Accumulated deficit (582,896)
Non-controlling interest 17,794
------------
TOTAL EQUITY 1,232,066
------------
TOTAL LIABILITIES AND EQUITY $41,046,594
============
MF GLOBAL HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
For the three months ended Sept. 30, 2011
Revenues
Commissions $366,324
Principal transactions 12,023
Interest income 113,189
Other 8,182
------------
Total Revenues 499,718
Interest and transaction-based expenses:
Interest expense 34,006
Execution and clearing fees 186,945
Sales commissions 72,843
------------
Total interest and transaction-based expenses 293,794
Revenues, net of interest and transaction-
based expenses 205,924
------------
Expenses
Employee compensation and benefits 133,549
Employee compensation related to non-
recurring IPO awards -
Communications and technology 38,585
Occupancy and equipment costs 16,808
Depreciation and amortization 12,802
Professional fees 20,798
General and other 29,902
Restructuring charges 10,037
Impairment of goodwill 4,912
------------
Total other expenses 267,393
(Loss)/gain on exchange seats and shares (388)
Loss on extinguishment of debt 16,051
Interest on borrowings 17,957
------------
Income before provision for income taxes (95,865)
Provision for income taxes 91,559
Equity in income of unconsolidated cos. 1,252
------------
Net loss (186,172)
Less: Net income attributable to
Non-controlling interest 394
------------
Net loss attributable to MF Global Holdings (186,566)
------------
Dividends declared on preferred stock 5,006
Cumulative and participating dividends -
------------
Net loss applicable to common shareholders ($191,572)
============
-----------------------------------------------------------------
[00003] MF GLOBAL'S CHAPTER 11 DATABASE
-----------------------------------------------------------------
Debtor: MF Global Holdings Ltd.
717 Fifth Avenue
New York, NY 10022
Bankruptcy Case No.: 11-15059
Debtor-affiliate filing separate Chapter 11 petition:
Entity Case No.
------ --------
MF Global Finance USA Inc.
fka Man Group Finance, Inc. 11-15058
Chapter 11 Petition Date: Oct. 31, 2011
Bankruptcy Court: United States Bankruptcy Court
Southern District of New York
Bankruptcy Judge: Honorable Martin Glenn
Debtor's Counsel: J. Gregory Milmoe, Esq.
Kenneth S. Ziman, Esq.
J. Eric Ivester, Esq.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, NY 10036
Tel: (212) 735-3000
E-mail: gregory.milmoe@skadden.com
ken.ziman@skadden.com
eric.ivester@skadden.com
Claims & Noticing Agent: The Garden City Group, Inc.
Total Assets: $41,046,594,000 as of Sept. 30, 2011
Total Liabilities: $39,683,915,000 as of Sept. 30, 2011
A person familiar with the matter told The Wall Street Journal
that Weil, Gotshal & Manges restructuring lawyers were preparing
to represent MF Global's London affiliate. The American Lawyer
reported that British firm Ashurst is also advising on the U.K.
administration of MF Global UK and MF Global YK Services,
according to U.K. publication Legal Week.
Another source told WSJ that restructuring lawyers at Sullivan &
Cromwell are advising MF Global.
The American Lawyer also related that the U.K.'s Financial
Services Authority has appointed KPMG to manage a special
administration regime for MF Global.
MF Global's many creditors, according to The American Lawyer, have
also begun to line up outside law firms, including Simpson Thacher
& Bartlett and Kirkland & Ellis. Simpson Thacher represents
JPMorgan Chase Bank, N.A., administrative agent for the Debtors'
lenders.
The petition was signed by Bradley I. Abelow, Executive Vice
President and Chief Executive Officer of MF Global Finance USA
Inc.
-----------------------------------------------------------------
[00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS
-----------------------------------------------------------------
Entity Nature of Claim Amount
------ --------------- ------
JPMorgan Chase Bank, N.A., Bond Debt $1,200,875,000
as Indenture Trustee
270 Park Ave
New York, NY 10017
Deutsche Bank Trust Company Bond Debt $325,000,000
Americas, as Indenture
Trustee for 6.250% Notes
due Aug. 8, 2016
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $325,000,000
Americas, as Indenture
Trustee for 3.375% Notes
due Aug. 1, 2018
Corporate Trust Office at
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $287,500,000
Americas, as Indenture
Trustee for 1.875% Notes
due Feb. 1, 2016
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $78,617,000
Americas, as Indenture
Trustee for 9% Notes
due June 20, 2038
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Headstrong Services, LLC Unknown $3,936,074
4035 Ridge Top Rd Ste 300
Fairfax, VA 22030
Tel: (703) 272-6700
Fax: (703) 272-2000
CNBC Unknown $845,397
c/o NBC Universal CFS
Bank of America
NBC Universal Lock Box
#402971
Atlanta, GA 30384-2971
10 Fleet Pl
London, EC4M7QS GB
Phone: 0207 653 9300
Sullivan & Cromwell LLP Unknown $596,939
125 Broad St
New York, NY 10004-2498
Tel: (212) 558-4000
Fax: (212) 558-3588
Caplin Systems Limited Unknown $427,520
Cutlers Court, 115
Houndsditch
London EC3A 7BR GB
Wachtell, Lipton, Unknown $388,000
Rosen & Katz
51 W 52nd St
New York, NY 10019
Tel: (212) 403-1000
Fax: (212) 403-2000
Linklaters LLP Unknown $348,000
1345 Avenue of the Americas
New York, NY 10105
Tel: (212) 903-9000
Fax: (212) 903-9100
PricewaterhouseCoopers LLP Unknown $312,598
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 596-8000
Fax: (813) 286-6000
Dean Media Group Unknown $309,000
560 W Washington
Blvd Ste 420
Chicago, IL 60605
Oracle Corporation Unknown $302,704
500 Oracle Pkwy
Redwood Shores, CA 94065
Tel: (916) 315-4305
Fax: (650) 506-7200
ForwardThink Group Inc. Unknown $278,825
112 Candido Ct.
Manalapan, NJ 07726
Tel: (646) 873-6530
Bloomberg Finance LP Unknown $276,064
731 Lexington Ave.
New York, NY 10022
Fax: (917) 369-5000
The Gate Worldwide Unknown $229,739
(S) Pte Ltd
11 E 26th St Fl 14
New York, NY 10010-1422
Fax: (212) 508-3543
52 Craig Rd
Singapore 89690
Lever Interactive Unknown $178,900
1431 Opus Pl Ste 625
Downers Grove, IL 60515
Braxton Group LLC Unknown $172,325
7 Bridge View Dr
New Fairfield, CT 06812
Tel: (203) 312-9200
Forum Group Unknown $154,300
260 Madison Ave # 200
New York, NY 10016-2401
Tel: (212) 687-4050
Fax: (917) 256-0314
Shearman & Sterling Unknown $135,500
599 Lexington Ave
New York, NY 10022
Tel: (212) 848-4000
Fax: (212) 848-7179
RR Donnelly Unknown $118,600
111 South Wacker Dr
Chicago, IL 60606
Tel: (312) 326-8000
Fax: (212) 503-1344
Infinia Group LLC Unknown $115,001
515 West 20th St Fl 3
New York, NY 10011
Tel: (212) 463-5100
Directors Fees Unknown $105,000
717 Fifth Ave
New York, NY 10022
ADK America Inc. Unknown $101,958
515 West 20th St Fl 6 East
New York, NY 10011
3137 S La Cienega Blvd
Los Angeles, CA 90016
Alvarez & Marsal Tax Unknown $65,000
Advisory Services LLC
600 Lexington Ave Fl 6
New York, 10022 10017
Tel: (212) 759-4433
Fax: (212) 328-8757
The Global Capital Unknown $63,250
Group, Ltd
88 W Schiller Ste 3008
Chicago, IL 60610
Tel: (312) 451-2676
Access Search Inc. Unknown $61,440
218 N Jefferson Ste 302
Chicago, IL 60661
Tel: (312) 930-1034
Fax: (312) 930-1070
Holland & Knight Unknown $59,000
Attn Bill Honan,
Executive Partner
31 W 52nd St
New York, NY 10019
Tel: (212) 513-3200
Fax: (212) 385-9010
JVKellyGroup Inc. Unknown $56,760
145 E Main St
Huntington, NY 11743
Tel: (631) 427-2888
Fax: (631) 427-0266
Willis of New York, Inc. Unknown $49,850
200 Liberty St Fl 7
New York, NY 100281-0001
Tel: (212) 344-8888
Fax: (212) 915-8511
Fleishman Hillard Inc. Unknown $42,000
4706 Paysphere Cir
Chicago, IL 60674
Tel: (314) 982-1700
Fax: (314) 231-2313
American Express Company Unknown $40,000
Corporate Services Operations
AESC-P
20022 N 31st Ave
Mail Code AZ-08-03-11
Phoenix, AZ 85027
Tel: (800) 528-2122
Other Regrsn Unknown $37,280
111 South Wacker Dr
Chicago, IL 60606
Tel: (312) 326-8000
Technology Management Unknown $34,000
Consulting Group
DBA Roadmap Learning
235 Iris Rd
Lakewood, NJ 08701
Eloqua Corporation Unknown $33,000
1921 Gallows Rd Ste 250
Vienna, VA 22182-3900
Fax: (302) 655-5049
GKH Law Offices Unknown $30,074
One Azrieli Center,
Round Bldg
Tel Aviv 67021 Israel
Phone: 972-3-607-4444
Fax: 972-3-607-4422
1 Shmuel Ha'Nagid Street,
4th Fl
Jerusalem 94592 Israel
Phone: 972-2-623-2683
Fax. 972-2-623-6082
The Siegfried Group LLP Unknown $30,000
1201 Market St Ste 700
Wilmington, DE 19801-1147
Synechron (Synechron Inc.) Unknown $29,740
15 Corporate Pl S Ste 400
Piscataway, NJ 08854
Tel: (732) 562-0088
Fax: (732) 562-1414
Amideo and Associates Unknown $27,300
787 S Shore Drive
Miami Beach, FL 33141
Tel: (305) 519-5377
BTA Unknown $26,978
Promontory Financial Unknown $25,000
Group LLC
1201 Pennsylvania Ave
NW Ste 617
Washington, DC 20004-2401
Tel: (202) 662-6980
Fax: (202) 783-2924
Media Two Unknown $25,000
319 W Martin St Ste 200
Raleigh, NC 27601
Tel: (919) 553-1246
Ticker Consulting LLC Unknown $22,800
3 Cypress Dr
Cedar Knolls, NJ 07927
Adscom Solutions LLC Unknown $19,440
Attn: Andre Pires
201 East 12 St
New York, NY 10003
Premiere Global Unknown $18,227
Services Inc.
The Terminus Building
3280 Peachtree Rd NE Ste 1000
Atlanta, GA 30305
Tel: (866) 548-3203
Fax: (404) 262-8540
Paul Hastings Unknown $11,646
Attn Barry Brooks
75 East 55th Street
New York, NY 10022
Tel: (212) 318-6000
Fax: (212) 319-4090
Fox Rothschild, LLP Unknown $11,645
Attn: Accounts Payable - 01
2000 Market St Fl 20
Philadelphia, PA 19103-3222
Tel: (215) 299-2000
Fax: (215) 299-2150
KPMG LLP Unknown $10,000
Dept. 0511
POB 120001
Dallas, TX 75312-0511
Fax: (212) 758-9819
Stephanie G. Schrock Unknown $10,000
7716 N Paulina St Unit 1N
Chicago-Rogers Park, IL 60626
-----------------------------------------------------------------
[00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK
-----------------------------------------------------------------
The Debtors disclose that these entities beneficially own in
excess of 5% of any class of voting stock in MF Global Holdings
Ltd. as of Sept. 30, 2011:
Amount and
Nature of Percentage
Name and Address of Beneficial of Common
Beneficial Owner Ownership Stock
------------------- ---------- ----------
FMR LLC 13,917,938 8.44%
c/o Pyramis Global
Advisors, LLC
900 Salem Street
Smithfield, RI, 02917
Guardian Life Insurance 12,879,811 7.81%
Company
c/o RS Investments
388 Market Street
Suite 1700
San Francisco, CA 94111
Fine Capital Partners, L.P. 21,504,101 7.37%
590 Madison Avenue, 5th Floor
New York, NY 10022
Cadian Capital 10,180,286 6.17%
Management, LLC
461 Fifth Avenue
24th Floor
New York, NY 10017
TIAA-CREF 9,520,582 5.77%
730 Third Avenue
New York, NY 10017
Piper Jaffray Companies 9,132,597 5.54%
c/o Advisory Research, Inc.
180 N. Stetson
Chicago, IL 60601
Dimensional Fund Advisors, LP 8,920,497 5.41%
Palisades West
Building One
6300 Bee Cave Road
Austin, TX 78746
Rydex Security Global 8,456,992 5.13%
Investors, LLC
40 East 52nd Street
16th Floor
New York, NY 10022
-----------------------------------------------------------------
[00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
-----------------------------------------------------------------
MF Global Holdings Ltd. and MF Global Finance USA Inc., sought and
obtained an order from Judge Martin Glenn of the U.S. Bankruptcy
Court for the Southern District of New York providing for the
joint administration of their separate Chapter 11 cases for
procedural purposes.
MF Global Holdings Ltd. is the indirect owner of MF Global Finance
USA Inc. The Debtors assert that they are "affiliates" as the
term is defined in Section 101(2) of the Bankruptcy Code and as
used in Rule 1015(b) of the Federal Rules of Bankruptcy Procedure.
Accordingly, joint administration of the Debtors' cases is
appropriate under Rule 1015(b), the Debtors maintain.
The Debtors further assert that joint administration of their
Chapter 11 cases will save time and money and avoid duplicative
and potentially confusing filings by permitting counsel for all
parties-in-interest to (a) use a single caption on the numerous
documents that will be served and filed in the cases and (b) file
the papers in one case rather than in multiple cases.
In addition, the Debtors aver that joint administration will
protect parties-in-interest by ensuring that parties in each of
the Debtors' Chapter 11 cases will be apprised of the various
matters before the Court in these cases.
The Debtors assured the Court that rights of the creditors of each
of the Debtors will not be adversely affected by joint
administration of the cases inasmuch as the relief sought is
purely procedural and is in no way intended to affect substantive
rights. Each creditor and other party-in-interest will maintain
whatever rights it has against the particular estate in which it
allegedly has a claim or right, the Debtors maintain.
-----------------------------------------------------------------
[00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE
-----------------------------------------------------------------
The Debtors sought and obtained an order from the U.S. Bankruptcy
Court for the Southern District of New York extending the deadline
to file schedules of assets and liabilities, schedules of
executory contracts and unexpired leases, and statements of
financial affairs to Dec. 14, 2011.
Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of
the Federal Rules of Bankruptcy Procedure, the Debtors are
required, within 14 days of the Petition Date, to file with the
Court (a) schedules of assets and liabilities, (b) schedules of
current income and expenditures, (c) statements of financial
affairs, (d) statements of executory contracts and unexpired
leases, and (e) a list of equity security holders. However, Rule
1007(c) of the Federal Rules of Bankruptcy Procedure provides that
an extension of the time for the filing of the Schedules and
Statements may be granted "on motion for cause shown."
Kenneth S. Ziman, Esq., at Skadden Arps Slate Meagher & Flom LLP,
in New York, explains that given the size and complexity of their
businesses, the Debtors have a significant amount of information
to prepare in order to file their Schedules and Statements. He
says that to prepare the required Schedules and Statements, the
Debtors must compile information from books, records and documents
relating to a multitude of transactions at numerous locations.
"Given the limited time available to prepare for the filing of
these cases, the substantial burden placed on management by
commencement of these cases, the competing demands on employees,
the time and attention the Debtors must devote to the
restructuring process, and the fact that certain prepetition
invoices have not yet been received or entered into the Debtors'
financial systems, the Debtors have not had the opportunity to
gather the necessary information to prepare and file their
respective Schedules and Statements," Mr. Ziman tells the Court.
The Debtors believe that the 14-day automatic extension of time to
file the Schedules and Statements provided by Rule 1007(c) will
not be sufficient to permit completion of the Schedules and
Statements.
Accordingly, the Debtors assert that due to the complexity of
their operations, and the substantial burdens already imposed on
the Debtors' management by the commencement of the Chapter 11
cases on an emergency basis, "cause" exists to extend the current
deadline for filing the Schedules and Statements.
-----------------------------------------------------------------
[00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING
-----------------------------------------------------------------
Judge Paul A. Engelmayer of the United States District Court for
the Southern District of New York approved on Oct. 31 the
liquidation of MF Global Inc., which liquidation was initiated by
the Securities Investor Protection Corporation, which maintains a
special reserve fund authorized by Congress to help investors at
failed brokerage firms.
The District Court appointed James W. Giddens as trustee for the
liquidation, and further appointed the law firm of Hughes Hubbard
& Reed as counsel to Mr. Giddens. Mr. Giddens and his law firm
also serve as trustee of the liquidation proceedings of Lehman
Brothers Inc. under the SIPA.
Mr. Giddens may be reached at:
James W. Giddens, Esq.
HUGHES HUBBARD & REED LLP
One Battery Park Plaza
New York, NY 10004-1482
Tel: (212) 837-6060
Fax: (212) 422-4726
E-mail: giddens@hugheshubbard.com
SIPC on Monday filed an application with the United States
District Court for the Southern District of New York for a
declaration that the customers of MF Global Inc. are in need of
the protections available under the SIPA.
Orlan Johnson, board chairman of the Securities Investor
Protection Corporation, said: "When the customers of a failed SIPC
member brokerage firm have left their securities in the custody of
that firm, SIPC acts as quickly as possible to protect those
customers. In this case, SIPC initiated the liquidation
proceeding within hours of being notified by the SEC that a SIPC
case was necessary to protect the investing public."
The trustee is charged with giving notice of the proceeding and
mailing claim forms to the customers and other creditors of the
firm. Information about the case also will be made available on
the Web at http://www.sipc.org/
More information about the MF Global liquidation can also be found
at http://www.mfglobaltrustee.com/ The trustee e-mail address for
inquiries is MFGITrustee@hugheshubbard.com They have all set up a
call center for questions. The number in the U.S. callers is 1-
888-236-0808 and for non-U.S. callers is 1-503-597-5173.
ABOUT SIPC
The Securities Investor Protection Corporation is the U.S.
investor's first line of defense in the event a brokerage firm
fails, owing customers cash and securities that are missing from
customer accounts. SIPC either acts as trustee or works with an
independent court-appointed trustee in a brokerage insolvency case
to recover funds.
The statute that created SIPC provides that customers of a failed
brokerage firm receive all non-negotiable securities -- such as
stocks or bonds -- that are already registered in their names or
in the process of being registered. At the same time, funds from
the SIPC reserve are available to satisfy the remaining claims for
customer cash and/or securities custodied with the broker for up
to a maximum of $500,000 per customer. This figure includes a
maximum of $250,000 on claims for cash. From the time Congress
created it in 1970 through December 2010, SIPC has advanced $1.6
billion in order to make possible the recovery of $109.3 billion
in assets for an estimated 739,000 investors.
MEDIA CONTACT: Ailis Aaron Wolf
(703) 276-3265
aawolf@hastingsgroup.com
All investor inquiries of SIPC should be directed to
asksipc@sipc.org or (202) 371-8300.
* * *
Linda Sandler of Bloomberg News reported that Kevin Bell, senior
associate general counsel of SIPC, said MF Global Inc. customers
have been calling the agency's Washington offices asking for their
money.
"What customers ask is, 'When am I getting my money?'," said Mr.
Bell. "You tell them to sit tight, and start gathering their
information so they can file claims. Canceled checks, trade
confirmations, account statements."
Mr. Giddens also served as trustee overseeing the Lehman Brothers
Inc. brokerage firm's liquidation. In the Lehman case, it took
about 30 days to get claim forms out "because of the complexity,"
Mr. Bell said, according to Bloomberg. Claim forms were mailed
about 17 days after con man Bernard Madoff's firm went into
liquidation in 2008, Mr. Bell related.
The Lehman Brothers Holdings Inc. unit has been in liquidation
since 2008 after its parent filed for bankruptcy with $639 billion
in assets.
"This is like a mini-Lehman," Mr. Bell told Bloomberg. "We have
to get control of the books and records. We have to get the names
off the books and records."
When broker-dealers are liquidated, customer accounts often go to
other firms, sometimes in "bulk transfers," Mr. Bell added.
Barclays Plc (BARC) took over accounts from Lehman's brokerage,
giving 72,000 brokerage customers access to $40 billion in frozen
assets.
The New York-based parent company broke rules about keeping
clients' collateral separate from its own accounts, futures
exchange CME Group Inc. said, according to Bloomberg.
Mr. Giddens, according to Bloomberg, said he is "taking steps" to
protect customers and set up an "orderly and fair" process to
satisfy their claims. He and his team plan to be on the company's
premises to provide oversight, he said in a statement, Bloomberg
noted. SIPC had lawyers in New York and has "flown in" an
operations vice president to work with [Mr.] Giddens, Mr. Bell
told Bloomberg.
"The trustee is trying to get a clamp on the assets," Mr. Bell
said. "We're looking at the next 10 days being very hectic." He
declined to comment on any missing funds, according to Bloomberg.
-----------------------------------------------------------------
[00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK
-----------------------------------------------------------------
NEW YORK -- November 1, 2011 -- NYSE Regulation, Inc., said
it determined that the common stock of MF Global Holdings Ltd. --
ticker symbol MF -- should be suspended immediately.
NYSE Regulation has determined that the Company is no longer
suitable for listing. This decision was reached in view of the
fact that both it and its MF Global Finance USA Inc. subsidiary
filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy
Code with the U.S Bankruptcy Court for the Southern District of
New York on October 31, 2011. In addition, NYSE Regulation noted
the uncertainty as to the timing and outcome of the bankruptcy
process, as well as the ultimate effect of this process on the
Company's common stockholders.
Separately, as part of its assessment, NYSE Regulation also
considered the Company's most recently filed quarterly net loss
for the period ended September 30, 2011, as well as recent credit
rating agency downgrades during the week of October 24, 2011, and
the ongoing liquidity position of the Company.
NYSE Regulation also reviewed an October 31, 2011
announcement from the Securities Investor Protection Corporation,
indicating that it was initiating the liquidation of MF Global
Inc., the Company's brokerage subsidiary, under the Securities
Investor Protection Act.
The Company has a right to a review of this determination by
a Committee of the Board of Directors of NYSE Regulation.
Application to the Securities and Exchange Commission to delist
the issue is pending the completion of applicable procedures,
including any appeal by the Company of the NYSE Regulation staff's
decision. The NYSE noted that it may, at any time, suspend a
security if it believes that continued dealings in the security on
the NYSE are not advisable.
-----------------------------------------------------------------
[00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D'
-----------------------------------------------------------------
Standard & Poor's Ratings Services on Oct. 31 lowered its
counterparty credit rating on MF Global to 'D' from 'BBB-'. "At
the same time, we lowered the company's debt ratings to 'D'. We
are removing the ratings from CreditWatch where they were placed
on Oct. 26, 2011, with negative implications," S&P said.
MF Global filed for Chapter 11 bankruptcy protection in a New York
bankruptcy court early Monday. Standard & Poor's placed MF Global
on CreditWatch negative on Oct. 26, 2011, following the company's
announcement of a large generally accepted accounting principles
loss for its second fiscal quarter of 2012 (quarter ended Sept.
30, 2011). "The CreditWatch placement reflected our view that the
company would be unable to generate near-term profitability and
that there would be potential funding pressure as confidence in
the company eroded," S&P said.
-----------------------------------------------------------------
[00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service on Oct. 27 downgraded the long-term
ratings of MF Global Holdings Ltd., including its senior,
unsecured debt rating to Ba2 from Baa3. The ratings remain under
review for possible further downgrade.
RATINGS RATIONALE
Moody's Investors Service downgraded the long-term ratings of MF
Global Holdings Ltd., including its senior, unsecured debt rating
to Ba2 from Baa3. The ratings remain under review for possible
further downgrade.
Moody's said the downgrade reflects Moody's view that MF Global's
weak core profitability contributed to it taking on substantial
risk in the form of its exposure to European sovereign debt in
peripheral countries. At the end of the second quarter, MF
Global's $6.3 billion sovereign risk exposure represented 5 times
the company's tangible common equity, Moody's noted.
"The tactical decision to assume this outsized proprietary
position, highlights the core profitability challenges faced by MF
Global and the scope of the re-engineering challenge facing the
firm's management," said Al Bush, a Moody's senior analyst.
Moody's believes that the risk appetite revealed by this position,
in tandem with the significant quarterly loss that MF Global
reported, subjects the firm to a heightened risk of loss of client
and counterparty confidence -- and could thus further challenge
the company's franchise.
The review for downgrade will focus on MF Global's ability to
manage its franchise risk, including its success in retaining
customers, counterparties and employees during the current
stressed environment.
Moody's noted that the Ba2 rating is supported by the firm's
adequate liquidity profile and price transparency of a majority of
the firm's assets.
The last rating action on MF Global was on October 24, 2011, when
Moody's downgraded the long-term issuer ratings to Baa3 from Baa2
and placed the ratings under review for further downgrade.
MF Global is headquartered in New York.
The principal methodology used in this rating was Global
Securities Industry Methodology published in December 2006.
Downgrades:
Issuer: MF Global Holdings Ltd.
-- Issuer Rating, Downgraded to Ba2 from Baa3
-- Multiple Seniority Shelf, Downgraded to (P)Ba2, (P)Ba3,
(P)B1 from (P)Baa3, (P)Ba1, (P)Ba2
-- Pref. Stock Preferred Stock, Downgraded to B1 from Ba2
-- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to
Ba2 from Baa3
-- Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2
from Baa3
-----------------------------------------------------------------
[00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2'
-----------------------------------------------------------------
Fitch Ratings on Oct. 27 has downgraded the ratings of MF Global
Holdings Ltd. (MF) including the company's Issuer Default Ratings
(IDR) to 'BB+/B' from 'BBB/F2'. At the same time, Fitch has placed
the ratings on Rating Watch Negative.
This rating actions reflect MF's continued challenges in
establishing a sustainable level of profitability and improving
its leverage profile. The low interest rate environment, which is
expected to last over the medium term, and reduced commissions are
hindering profitability in the firm's traditional clearing
activities. Further, volatile capital markets present MF with
significant headwinds in executing its strategic transformation
from a pure broker to a broker-dealer and, longer term, to a full
investment bank without outsized incremental risk.
In addition, the firm's increase in principal and, to a lesser
extent, proprietary trading activities has elevated the firm's
traditional risk profile. These increased risk taking activities
have resulted in sizeable concentrated positions relative to the
firm's capital base, leaving MF vulnerable to potential credit
deterioration and significant margin calls. While Fitch notes
that the firm has made some progress in rationalizing its capital
structure, the firm's persistently weak earnings and leverage are
no longer consistent with an investment grade financial
institution.
Fitch expects to resolve the Rating Watch Negative on MF's ratings
as the firm concludes the evaluation of various strategic options.
Contemplated strategic initiatives include efforts to build scale
in its futures commission merchant (FCM) and the disposition of
assets, which could impact capitalization as well as the company's
earnings profile. The resolution of the Rating Watch Negative
could result in a ratings affirmation or a further downgrade of
MF's ratings.
MF Global Holdings Ltd. is a leading futures and options broker
with subsidiaries in major financial hubs. Its main subsidiaries
are registered futures commissions merchants and broker/dealers.
MF is heavily regulated as a member of commodities, futures, and
securities exchanges in the U.S., Europe and the Asia-Pacific
region.
Fitch has downgraded the following ratings for MF Global Holdings
Ltd.:
-- Long-term IDR to 'BB+' from 'BBB'; Rating Watch Negative;
-- Short-term IDR to 'B' from 'F2'; Rating Watch Negative;
-- Senior debt to 'BB+' from 'BBB'; Rating Watch Negative;
-- Preferred to 'B+' from 'BB+'; Rating Watch Negative.
-----------------------------------------------------------------
[00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS
-----------------------------------------------------------------
DULLES, Virginia -- Nov. 1, 2011 -- Shocking details
surrounding the surprise bankruptcy of securities firm giant MF
Global Holdings Ltd. were coming to light Tuesday, one day after
the company turned in its Chapter 11 papers following an ill-timed
bet on the European debt markets.
While trading exchanges all over the globe rushed to protect
their markets from the fallout, reports began to surface that the
firm, which is headed by former New Jersey Gov. Jon Corzine, had
failed to keep the company's money separate from its customers'
accounts. There were anecdotal reports that hundreds of millions
of MF Global customers' dollars are currently missing, according
to Natural Gas Intelligence (NGI). Subsequent reports said the
number could be even larger. In its bankruptcy filing to the
United States Bankruptcy Court for the Southern District of New
York on Monday, MF Global said the company had debt of $39.7
billion and assets of $41 billion.
"The MF Global story is a fast-moving one. Tuesday morning
people were saying a couple hundred million dollars of customer
funds were missing. By Tuesday afternoon that number had
ballooned to $700 million," said Ed Kennedy, a broker with INTL
Hencorp Futures LLC. "This MF Global implosion will change the
entire game because something is not passing the smell test here.
Moving customer funds into the company's account is not a one-
person operation. With the way regulations are now, an entire
chain of people would have to be involved . . . and each one of
those people sat through the ethics class. Also, what about the
exchanges? What about their clearing operations? They know what
is supposed to be in that segregated customer account."
Kennedy said the shake-up and resulting investigation will
certainly impact how the Dodd-Frank regulatory reform rules are
written and implemented. "I guarantee a month from now this is
what everyone is going to be talking about, and we'll take a look
at it at our hedging seminar in Chicago in December," he said.
Giving tips and teaching people how to use market tools to
their advantage in today's market, Kennedy and his colleague Tom
Saal will host a seminar: "Where the Market is Going and What Can
You Do About It?" seminar Dec. 7-9 in Chicago. Visit
http://seminar.intelligencepress.com/Hedging2011/ for more
information.
In responding to the MF Global crisis, trading exchanges such
as CME Group, Nymex and ICE said Monday they were accepting
"liquidation only" orders from MF Global clients and have
restricted electronic access to their markets. In a statement on
its Web site, MF Global said, "This means that you may place
offsetting orders for current open positions at MF Global but may
not place any new orders. Performance of your trades is
guaranteed by exchange clearinghouses."
During a 3Q2011 earnings conference call, CME Group CEO Craig
Donohue said the exchange will no longer recognize MF Global or
any of its divisions as a guarantor for purposes of floor trading
privileges. "Throughout the day [Monday] our team worked closely
with the firm, public customers and exchange members to assist
customers in establishing new accounts in dealing with open
positions and market exposures," Donohue said, adding that Monday
was a "very difficult day for all concerned."
For its part, ICE said MF Global is accepting and processing
liquidating orders from customers with outstanding open positions
in ICE Futures U.S. Inc. contracts.
The Commodity Futures Trading Commission and Securities and
Exchange Commission said Tuesday they had determined that a
bankruptcy proceeding led by the Securities Investor Protection
Commission (SIPC) would be "the safest and most prudent course of
action to protect customer accounts and assets." SIPC announced
Tuesday that it is initiating the liquidation of MF Global under
the Securities Investor Protection Act.
About the Natural Gas Futures Price Seminar
Saal and Kennedy will be taking time off from active natural
gas futures trading, in a repeat of the very popular Natural Gas
Futures Hedging Seminar, at the JW Marriott Chicago, Dec. 7-9,
2011. For more information visit
http://seminar.intelligencepress.com/hedging2011/
*** End of Issue No. 1 ***
MF GLOBAL BANKRUPTCY NEWS Issue Number 1
-----------------------------------------------------------------
Copyright 2011 (ISSN XXXX-XXXX) November 3, 2011
-----------------------------------------------------------------
Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001
-----------------------------------------------------------------
MF GLOBAL BANKRUPTCY NEWS is published by Bankruptcy Creditors'
Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania
19030, on an ad hoc basis (generally every 10 to 20 days) as
significant activity occurs in the Debtors' cases. New issues are
prepared by Michille P. Deiparine, Neil U. Lim, Psyche A.
Castillon and Peter A. Chapman, Editors. Subscription rate is
US$45 per issue. Any re-mailing of MF GLOBAL BANKRUPTCY NEWS is
prohibited.
=================================================================
IN THIS ISSUE
-------------
[00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS
[00001] BACKGROUND & DESCRIPTION OF MF GLOBAL
[00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011
[00003] MF GLOBAL'S CHAPTER 11 DATABASE
[00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS
[00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK
[00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
[00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE
[00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING
[00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK
[00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D'
[00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2'
[00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2'
[00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS
KEY DATE CALENDAR
-----------------
10/31/11 Voluntary Chapter 11 Petition Date
11/01/11 3:00 P.M. First Day Hearing before Judge Glenn
11/30/11 Deadline to Provide Utilities with Adequate Assurance
12/14/11 Deadline to File Schedules of Assets and Liabilities
12/14/11 Deadline to File Statement of Financial Affairs
12/14/11 Deadline to File Lists of Contracts and Leases
01/29/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027
02/28/12 Expiration of Debtors' Exclusive Plan Proposal Period
02/28/12 Deadline to Make Decisions About Lease Dispositions
04/28/12 Expiration of Debtors' Exclusive Solicitation Period
10/30/13 Deadline for Debtors' Commencement of Avoidance Actions
-----------------------------------------------------------------
[00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS
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Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited.
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We have published similar newsletters tracking billion-dollar
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Technologies, W.R. Grace & Co., Delphi Corp., Tribune Company,
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same firm is provided at no additional cost.)
MF GLOBAL BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited.
Distribution to multiple individuals at the same firm is provided
at no additional charge; folks outside of your firm should set-up
and pay for their own subscriptions. Subscriptions may be
canceled at any time without further obligation.
-----------------------------------------------------------------
[00001] BACKGROUND & DESCRIPTION OF MF GLOBAL
-----------------------------------------------------------------
MF Global Holdings Ltd.
717 Fifth Avenue
New York, NY 10022
Tel: (212) 589-6200
http://www.mfglobal.com/
MF Global Holdings Ltd. (NYSE: MF) is one of the world's leading
brokers of commodities and listed derivatives. MF Global provides
access to more than 70 exchanges around the world. The company is
also an active broker-dealer in markets for commodities, fixed
income securities, equities, and foreign exchange. As of Oct. 30,
2011, MF Global is one of 20 primary dealers authorized to trade
U.S. government securities with the Federal Reserve Bank of New
York. In addition to executing client transactions, MF Global
provides research and market commentary to help clients make
trading decisions, as well as providing clearing and settlement
services. The Company is also active in providing client
financing and securities lending services.
MF Global's roots go back nearly 230 years to a sugar brokerage on
the banks of the Thames River in London.
MF Global is headquartered in the United States, and has
operations globally, including the United Kingdom, Australia,
Singapore, India, Canada, Hong Kong, and Japan. The Company's
priority is serving the needs of its diversified global client
base, which includes a wide range of institutional asset managers
and hedge funds, professional traders, corporations, sovereign
entities, and financial institutions. The Company also offers a
range of services for individual traders and introducing brokers.
MF Global has roughly 2,870 employees worldwide, 13 of which are
employed by the Debtors in the United States. MF Global derives
revenues from three main sources: (a) commissions generated from
execution and clearing services; (b) principal transactions
revenue, generated both from client facilitation and proprietary
activities; and (c) net interest income from cash balances in
client accounts maintained to meet margin requirements, as well as
interest related to MF Global's collateralized financing
arrangements and principal transactions activities. For fiscal
2011, MF Global generated total revenues of roughly $2.2 billion,
revenues net of interest and transaction-based expenses of roughly
$1.1 billion, and incurred net loss attributable to MF Holdings,
the ultimate parent company, of $81.2 million.
Product Offerings
MF Global provides execution services for five broad categories of
products: commodities, equities, fixed income, foreign exchange,
and listed futures and options.
Many of the contracts and securities that MF Global trades are
listed on exchanges, while others are traded over-the-counter.
The Company executes orders for its clients on either an agency or
principal basis.
A. Commodities
MF Global provides clients execution services for transactions
relating to derivative contracts, including futures, options,
forward sale agreements and other types of instruments based on
the price of metals and industrial materials. Metal derivatives
are traded on exchanges and in the OTC markets. MF Global is one
of 12 designated ring-dealing members of the world's largest
metals exchange, the London Metal Exchange.
MF Global also executes trades in the energy derivatives market,
including futures, options, swaps, and forwards on a range of
energy products, including crude oil, natural gas, heating oil,
gasoline, propane, electricity and other energy commodities. MF
Global is an active market participant in both exchange-listed and
OTC-traded energy derivatives, and has been consistently ranked as
one of the leading providers by volume of clearing and execution
services on both the New York Mercantile Exchange and ICE Futures
Europe.
MF Global also delivers its clients targeted hedging and risk
management solutions and helps clients locate trading
opportunities in a broad array of agricultural commodities
markets. MF Global provides trade execution services for a wide
range of OTC and listed agricultural commodities markets,
including the grain and oilseed futures and options markets and
for soft commodities, such as coffee, cocoa, and sugar, on
exchanges in North America, Europe and Asia Pacific.
B. Equities
MF Global provides execution services in both cash equities and
equity derivative products around the globe. Equity derivative
products include futures, ETFs, options (single stock, index and
ETF), contracts for difference (where legally available), and
other securities whose underlying value is related to the price of
one or more stocks, a basket of stocks, or stock indices.
Recently, MF Global expanded its global cash equity, equity
derivatives, portfolio trading, and electronic trading services
teams to provide improved service for its clients in a variety of
major markets around the world.
C. Fixed Income
MF Global provides execution services for a variety of fixed
income products. These include U.S. Treasury and agency
securities and bonds issued by European governments and by
multinational institutions. The Company also trades corporate
bonds, mortgage-backed and asset-backed securities, emerging
market securities, as well as credit default swaps and interest
rate swaps. MF Global has been designated as a primary leader of
U.S. treasury securities, enabling it to serve as a counterparty
to the Federal Reserve Bank of New York in open-market operations,
and participate directly in U.S. Treasury auctions. MF Global
also provides analysis and market intelligence to the Federal
Reserve's trading desks and to its clients.
D. Foreign Exchange
MF Global delivers access to a range of products and trading
opportunities in the foreign exchange markets worldwide. Many of
these foreign exchange transactions are undertaken by MF Global's
clients in connection with the purchase or sale of other
instruments. Most foreign exchanges are conducted on an OTC
basis.
E. Futures and Options
MF Global provides execution services for listed futures and
options, including interest rate, government bond, and index
futures and options. MF Global's floor brokers offer clients
access to traditional floor execution for futures and options that
continue to have price discovery on trading floors. Where futures
and options have moved to electronic trading platforms, MF Global
provides extensive electronic connectivity to global markets.
Service Offerings
In addition to executing client transactions, MF Global provides
clearing services, which are a critical component of the futures
and options business, as well as a range of services designed to
assist clients in developing trading ideas and managing their
trading portfolios.
A. Clearing and Financing
MF Global provides a number of prime services, including clearing
and settlement of trades, client financing, securities lending,
and a range of administrative services. The revenue MF Global
earns from prime services activities consists of commissions,
interest income on client custodial accounts, principal
transactions and fees. In addition to the clearing transactions
the Company executes for its own clients, the Company also clears
transactions for clients that are using other executing brokers or
executing their orders directly on an exchange. Moreover, MF
Global has developed a substantial business in clearing
transactions on behalf of other brokers.
B. Research and Market Commentary
MF Global offers a broad array of market research, analysis, and
commentaries that provide clients with actionable insights they
can use to inform their trading strategies and investment
decisions. MF Global's proprietary offerings include research on
a wide range of instruments, markets and industries, equity
research on many of the world's largest companies and industry
sectors, policy-focused research on U.S. legislative and
regulatory topics, and analysis of macroeconomic trends and issues
driving financial markets.
Regulation and Exchange Memberships
MF Global's business activities are extensively regulated by a
number of U.S. and foreign regulatory agencies and exchanges.
These regulatory bodies and exchanges are charged with protecting
investors by imposing requirements relating typically to capital
adequacy, licensing of personnel, conduct of business, protection
of client assets, record-keeping, trade-reporting and other
matters. They have broad powers to monitor compliance and punish
non-compliance. If MF Global fails to comply with applicable
regulations, it may be subject to censure, fines, cease-and-desist
orders, suspension of its business, removal of personnel, civil
and criminal litigation, revocation of operating licenses or other
sanctions.
In the United States, MF Global is principally regulated in the
futures markets by the Commodity Futures Trading Commission, the
Chicago Mercantile Exchange, and the National Futures Association
and in the securities markets by the Securities and Exchange
Commission, the Financial Industry Regulatory Authority, and the
Chicago Board Options Exchange. Among other things, the CFTC,
SEC, FSA and other U.S. and non-U.S. regulators require MF Global
to maintain specific minimum levels of regulatory capital in MF
Global's operating subsidiaries that conduct its futures and
securities business. Further, as participants in the financial
services industry, MF Global's business must comply with the anti-
money laundering laws of the jurisdictions in which MF Global does
business, including, in the U.S., the USA PATRIOT Act, which
requires the Company to know certain information about its clients
and to monitor their transactions for suspicious activities, as
well as the laws of the various states in which the Company does
business or where the accounts with which the Company does
business reside. MF Global's business is also subject to rules
promulgated by the U.S. Office of Foreign Assets Control, which
requires that MF Global refrain from doing business, or allow its
clients to do business through it, in certain countries or with
certain organizations or individuals on a prohibited list
maintained by the U.S. government.
PREPETITION INDEBTEDNESS
As of Sept. 30, MF Global and its subsidiaries had $41,046,594,000
in total assets and $39,683,915,000 in total liabilities.
A. Liquidity Facility Agreement
The Company owed JPMorgan Chase Bank, N.A., as administrative
agent, and several lenders pursuant to a five-year revolving
credit facility dated as of June 15, 2007, the aggregate principal
amount of roughly $1.2 billion, $1.172 billion of which was drawn
as of the Oct. 31, 2011.
The Liquidity Facility permits the Company, in addition to certain
of its subsidiaries, to borrow funds under the Liquidity Facility
until June 15, 2014. Roughly $689.6 million is available for
borrowing until the Maturity Date, and roughly $511.3 million is
available for borrowing until June 15, 2012.
The Liquidity Facility includes a covenant requiring the Company
to maintain a minimum Consolidated Tangible Net Worth of not less
than the sum of (a) 75% of the pro forma Consolidated Tangible Net
Worth as of March 31, 2010, after giving effect to the offering by
the Company of equity interests on June 2, 2010, including
exercise of the underwriters' option to purchase additional
shares, and the consummation in whole or in part of the offer to
exchange of the Company dated June 1, 2010, plus
(b) 50% of the net cash proceeds of any offering by the Company of
equity interests consummated after the second amendment effective
date plus (c) 25% of cumulative net income for each completed
fiscal year of the Company after the second amendment effective
date for which consolidated net income is positive.
The Liquidity Facility also requires the Company to limit its
consolidated capitalization ratio to be no greater than 37.5% on
or after March 31, 2011, and before March 31, 2012; and 35% on or
after March 31, 2012.
B. Secured Facility to MF Global Inc.
On June 29, 2011, the Company's U.S. regulated broker-dealer
subsidiary, MF Global Inc., entered into a $300 million 364-day
secured revolving credit facility with a syndicate of lenders of
which MFGI has borrowed roughly $210 million as of Oct. 31, 2011.
JPMorgan Chase Bank, N.A., who serves as the Liquidity Facility
Agent, is also the Administrative Agent and a lender under the
MFGI Secured Facility. The other lenders are:
* Harris, N.A.,
* Bank of America, N.A.,
* Citibank, N.A.,
* Goldman Sachs Bank USA,
* Deutsche AG New York Branch,
* The Bank of New York Mellon,
* Commonwealth Bank of Australia,
* Standard Chartered Bank, and
* U.S. Bank National Association.
JPMorgan Securities LLC, BMO Capital Markets, Citigroup Global
Markets Inc., and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, serve as Joint Lead Arrangers and Joint Bookrunners
under the facility.
The MFGI Secured Facility is secured by eligible collateral owned
by MFGI. MF Holdings and MF Finance have provided unsecured
guarantees under the facility. The MFGI Secured Facility includes
a covenant requiring MFGI's consolidated tangible net worth at any
time not to be less than $227.3 million.
C. Unsecured Convertible Notes
MF Global Holdings Ltd.'s outstanding notes are:
Outstanding
Title Principal Amount
----- ----------------
1.875% Notes due February 1, 2016 $287,500,000
6.250% Notes due August 8, 2016 $325,000,000
3.375% Notes due August 1, 2018 $325,000,000
9% Notes due June 20, 2038 $78,617,000
The 1.875% Convertible Notes are payable semi-annually in arrears
on February 15 and August 1 of each year, since August 1, 2011.
Holders may convert the 1.875% Convertible Notes at their option
prior to August 1, 2015 upon the occurrence of certain events
relating to the price of its common stock or various corporate
events.
The 9% Convertible Notes are payable semi-annually in arrears on
June 15 and December 15 of each year. Holders may convert the 9%
Convertible Notes at their option at any time prior to the
maturity date. Upon conversion, the Company will pay or deliver,
as the case may be, cash, common stock or a combination thereof at
the Company's election. The initial conversion rate for the 9%
Convertible Notes is 95.6938 shares of Common Stock per
$1 principal amount of 9% Convertible Notes, equivalent to an
initial conversion price of approximately $10.45 per share of
common stock. The conversion rate will be subject to adjustment
in certain events.
In July 2011, the Company raised $325 million in aggregate
principal amount of 3.375% Convertible Senior Notes due 2018. In
August 2011, the Company also launched and priced its first senior
unsecured debt offering, issuing $325,000,000 in five-year 6.25%
senior notes. The Company used a portion of the net proceeds of
these offerings to repurchase a portion of its existing 9%
Convertible Notes, repaid a portion of its outstanding permanent
indebtedness under its Liquidity Facility and used the remainder
for general corporate purposes.
As of June 30, 2011, there were 1,500,000 shares of Series A
Preferred Stock in MF Holdings issued and outstanding to J.C.
Flowers. Also as of June 30, 2011, 403,550 shares of Series B
Preferred Stock remain outstanding.
EVENTS LEADING TO CHAPTER 11 FILING
As a global financial services firm, MF Global is materially
affected by conditions in the global financial markets and
worldwide economic conditions, Bradley I. Abelow, president and
chief operating officer of MF Global Holdings Ltd., related.
On September 1, 2011, MF Holdings said the FINRA informed it that
its regulated U.S. operating subsidiary, MFGI, was required to
modify its capital treatment of certain repurchase transactions to
maturity collateralized with European sovereign debt and thus
increase its required net capital pursuant to Rule 15c3-1 of the
U.S. Securities and Exchange Act. MFGI increased its required net
capital to comply with FINRA's requirement.
On October 24, 2011, Moody's Investor Service downgraded its
ratings on the Company to one notch above junk status based on its
belief that MF Holdings would announce lower than expected
earnings. On October 25, 2011, MF Holdings announced its results
for its second fiscal quarter ended September 30, 2011. The
Company revealed that it posted a $191.6 million net loss in the
second quarter, compared with a loss of $94.3 million for the same
period last year. The net loss reflected a decrease in revenue
primarily due to the contraction of proprietary principal
activities. Bloomberg News noted that MF Global has lost money in
nine of the previous 11 quarters.
Dissatisfied with the September announcement by MF Holdings of
MFGI's position in European sovereign debt, FINRA demanded that MF
Holdings announce that MFGI held a long position of $6.3 billion
in a short-duration European sovereign portfolio financed to
maturity, including Belgium, Italy, Spain, Portugal and Ireland,
Mr. Abelow related. MF Holdings made the announcement on October
25. These countries, according to Mr. Abelow, have some of the
most troubled economies that use the euro. Concerns over euro-
zone sovereign debt have caused global market fluctuations in the
past months and, in particular, in the past week. These concerns
ultimately led last week to downgrades by various ratings agencies
of MF Global's ratings to "junk" status. This sparked an increase
in margin calls against MFGI, threatening overall liquidity, Mr.
Abelow said.
Concerned about the events of the past week, some of MFGI's
principal regulators -- the Commodities Futures Trading Commission
and the SEC -- expressed their grave concerns about MFGI's
viability and whether it should continue operations in the
ordinary course, Mr. Abelow related. While the Company explored a
number of strategic alternatives with respect to MFGI, no viable
alternative was available in the limited time leading up to the
regulators' deadline.
CHAPTER 11 FILING
MF Global Holdings Inc. and MF Global Finance USA Inc. filed
voluntary Chapter 11 petitions mid-morning on Oct. 31 in the U.S.
Bankruptcy Court for the Southern District of New York after a
planned sale to Interactive Brokers Group was called off.
The Wall Street Journal's Mike Spector reported that people
familiar with the matter said MF Global had a tentative deal to
sell assets to Interactive Brokers as of late Sunday, but the
agreement fell apart as talks continued overnight. Discussions
ended around 5 a.m. Monday, one of these people said, according to
the Journal.
According to WSJ's Aaron Lucchetti, Justin Baer and Mike Spector,
under the deal:
-- MF Global would file for bankruptcy as soon as Monday;
-- None of its regulated entities would file;
-- Interactive Brokers would then likely make an initial bid
of about $1 billion during a court-supervised auction,
though the source described the deal as complicated and
that number could change; and
-- The sale would need to be approved by a bankruptcy judge.
Hours before the bankruptcy filing, the Federal Reserve Bank of
New York said it has informed MF Global that it has been suspended
from conducting new business with the New York Fed. "This
suspension will continue until MF Global establishes, to the
satisfaction of the New York Fed, that MF Global is fully capable
of discharging the responsibilities set out in the New York Fed's
policy, 'Administration of Relationships with Primary Dealers,' or
until the New York Fed decides to terminate MF Global's status as
a primary dealer," according to the Fed's statement.
WSJ's Doug Cameron and Joan E. Solsman report that MF Global is
one of 22 primary dealers at the NY Fed. They also report that
Hong Kong's stock exchange said Monday that MF Global's local unit
has been "meeting its financial obligations."
NY Times' Michael J. de la Merced and Ben Protess report that one
option is for MF Global to follow a precedent set by Lehman
Brothers in 2008 by seeking bankruptcy protection for the parent
company while selling some assets to Interactive Brokers.
Bloomberg News says MF Global is getting advice from Evercore
Partners Inc. as it seeks buyers.
NY Times recalls that MF Global and Interactive Brokers share a
deal history of sorts. In 2005, both competed for assets of
Refco, which had filed for bankruptcy. MF Global emerged the
victor with a $323 million bid.
EU Crisis
WSJ and NY Times recounted MF Global's fall after making wrong
bets on sovereign bonds issued by European countries. Both
reports noted that Jon S. Corzine -- former New Jersey governor
and one-time chairman of Goldman Sachs Group Inc. -- took over as
CEO at MF Global in March 2010. He set out to change MF Global
from a midsize derivatives broker to full-fledged investment bank
that took risks with its own capital. The trades, which ballooned
over $6 billion, helped knock MF Global's own debt ratings to junk
and drained investors' confidence in the firm.
WSJ further noted the crisis began with fiscal troubles in Greece,
which just received approval from European leaders for a second
bailout. Investors fret that a number of other countries won't be
able to pay all their obligations, which has hurt the values of
sovereign bonds that Mr. Corzine purchased.
NY Times said MF Global held about $6.3 billion in bonds issued by
Italy, Spain, Belgium, Ireland and Portugal. By contrast, Morgan
Stanley disclosed in October that it had just a $2.1 billion
exposure to Europe. WSJ noted Morgan Stanley had roughly $4
billion in net exposure to debt issued by Italy and Spain and
nearly 50 times as much cash and liquidity as MF Global.
Other Potential Buyers
Bloomberg News' Matthew Leising reported that Mr. Corzine reached
out to his former firm, Goldman Sachs, about selling all or part
of the company, according to two people with knowledge of the
firm's deliberations. Goldman Sachs may be interested in
acquiring futures positions or other financial assets at the right
price, said the people, who asked not to be named because the
discussions were private.
Bloomberg also said Macquarie Group Ltd. has examined MF Global's
books, though Australia's largest investment bank wasn't working
toward getting a deal done over the weekend, according to a person
with knowledge of the situation.
Another person told Bloomberg that Barclays Plc is among banks
that have looked at MF Global. State Street Corp. is also
reported to be a potential bidder, Bloomberg said.
Bonds Fall
Bloomberg News' Matthew Leising and Zachary R. Mider reported
Saturday morning that MF Global bonds declined to as low as 35
cents on the dollar Friday after the futures broker drew on its
credit lines and Moody's Investors Service and Fitch Ratings cut
the firm's ratings to junk. Bloomberg said the company's $325
million of 6.25% bonds, issued at par in August, fell 11.9 cents
to 50 cents on the dollar as of 5:17 p.m. in New York Friday, for
a yield of 25.2%, according to Trace, the bond-price reporting
system of the Financial Industry Regulatory Authority.
Bloomberg noted that MF Global has declined 67% last week and its
bonds started trading at distressed levels as the firm seeks a
buyer for its futures brokerage to raise capital.
Moody's slashed MF Global on Oct. 24 one level to Baa3 citing the
company's struggles to earn a profit, increased risk appetite and
low interest rates. On Friday, Moody's reduced MF Global two more
steps to Ba2 and put it under review for more possible cuts.
Fitch reduced the grade to BB+, the highest junk rating, from BBB,
citing increased trading with its own capital and the challenges
of earning profits from interest in the current "low interest rate
environment."
Bloomberg noted that MF Global said the next day it had a net loss
of $191.6 million for the quarter. It has lost money in nine of
the previous 11 quarters.
-----------------------------------------------------------------
[00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011
-----------------------------------------------------------------
MF GLOBAL HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
As of Sept. 30, 2011
ASSETS
Cash and cash equivalents $603,849
Restricted cash and segregated securities 9,940,799
Securities purchased under agreements to resell 9,524,214
Securities borrowed 2,638,113
Securities received as collateral 48,979
Securities owned 14,008,167
Receivables:
Brokers, dealers and clearing organizations 3,211,270
Customers 526,444
Other 132,848
Memberships in exchanges, at cost 4,533
Furniture, equipment and leasehold improvements 161,104
Intangible assets, net 32,297
Other assets 213,977
------------
TOTAL ASSETS $41,046,594
============
LIABILITIES AND EQUITY
Short-term borrowing $731,482
Securities sold under agreements to repurchase 17,109,858
Securities loaned 1,670,615
Obligation to return securities received
as collateral 48,979
Securities sold, not yet purchased 3,698,393
Payables:
Brokers, dealers and clearing organizations 2,547,829
Customers 12,707,997
Accrued expenses and other liabilities 272,561
Long-term borrowings 896,201
------------
TOTAL LIABILITIES $39,683,915
============
Commitments and contingences
Preferred stock
1,500,000 Series A Convertible 96,167
403,550 Series B Convertible 34,446
------------
EQUITY
Common stock 165,568
Additional paid-in capital 1,632,820
Accumulated other comprehensive income (1,220)
Accumulated deficit (582,896)
Non-controlling interest 17,794
------------
TOTAL EQUITY 1,232,066
------------
TOTAL LIABILITIES AND EQUITY $41,046,594
============
MF GLOBAL HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
For the three months ended Sept. 30, 2011
Revenues
Commissions $366,324
Principal transactions 12,023
Interest income 113,189
Other 8,182
------------
Total Revenues 499,718
Interest and transaction-based expenses:
Interest expense 34,006
Execution and clearing fees 186,945
Sales commissions 72,843
------------
Total interest and transaction-based expenses 293,794
Revenues, net of interest and transaction-
based expenses 205,924
------------
Expenses
Employee compensation and benefits 133,549
Employee compensation related to non-
recurring IPO awards -
Communications and technology 38,585
Occupancy and equipment costs 16,808
Depreciation and amortization 12,802
Professional fees 20,798
General and other 29,902
Restructuring charges 10,037
Impairment of goodwill 4,912
------------
Total other expenses 267,393
(Loss)/gain on exchange seats and shares (388)
Loss on extinguishment of debt 16,051
Interest on borrowings 17,957
------------
Income before provision for income taxes (95,865)
Provision for income taxes 91,559
Equity in income of unconsolidated cos. 1,252
------------
Net loss (186,172)
Less: Net income attributable to
Non-controlling interest 394
------------
Net loss attributable to MF Global Holdings (186,566)
------------
Dividends declared on preferred stock 5,006
Cumulative and participating dividends -
------------
Net loss applicable to common shareholders ($191,572)
============
-----------------------------------------------------------------
[00003] MF GLOBAL'S CHAPTER 11 DATABASE
-----------------------------------------------------------------
Debtor: MF Global Holdings Ltd.
717 Fifth Avenue
New York, NY 10022
Bankruptcy Case No.: 11-15059
Debtor-affiliate filing separate Chapter 11 petition:
Entity Case No.
------ --------
MF Global Finance USA Inc.
fka Man Group Finance, Inc. 11-15058
Chapter 11 Petition Date: Oct. 31, 2011
Bankruptcy Court: United States Bankruptcy Court
Southern District of New York
Bankruptcy Judge: Honorable Martin Glenn
Debtor's Counsel: J. Gregory Milmoe, Esq.
Kenneth S. Ziman, Esq.
J. Eric Ivester, Esq.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, NY 10036
Tel: (212) 735-3000
E-mail: gregory.milmoe@skadden.com
ken.ziman@skadden.com
eric.ivester@skadden.com
Claims & Noticing Agent: The Garden City Group, Inc.
Total Assets: $41,046,594,000 as of Sept. 30, 2011
Total Liabilities: $39,683,915,000 as of Sept. 30, 2011
A person familiar with the matter told The Wall Street Journal
that Weil, Gotshal & Manges restructuring lawyers were preparing
to represent MF Global's London affiliate. The American Lawyer
reported that British firm Ashurst is also advising on the U.K.
administration of MF Global UK and MF Global YK Services,
according to U.K. publication Legal Week.
Another source told WSJ that restructuring lawyers at Sullivan &
Cromwell are advising MF Global.
The American Lawyer also related that the U.K.'s Financial
Services Authority has appointed KPMG to manage a special
administration regime for MF Global.
MF Global's many creditors, according to The American Lawyer, have
also begun to line up outside law firms, including Simpson Thacher
& Bartlett and Kirkland & Ellis. Simpson Thacher represents
JPMorgan Chase Bank, N.A., administrative agent for the Debtors'
lenders.
The petition was signed by Bradley I. Abelow, Executive Vice
President and Chief Executive Officer of MF Global Finance USA
Inc.
-----------------------------------------------------------------
[00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS
-----------------------------------------------------------------
Entity Nature of Claim Amount
------ --------------- ------
JPMorgan Chase Bank, N.A., Bond Debt $1,200,875,000
as Indenture Trustee
270 Park Ave
New York, NY 10017
Deutsche Bank Trust Company Bond Debt $325,000,000
Americas, as Indenture
Trustee for 6.250% Notes
due Aug. 8, 2016
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $325,000,000
Americas, as Indenture
Trustee for 3.375% Notes
due Aug. 1, 2018
Corporate Trust Office at
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $287,500,000
Americas, as Indenture
Trustee for 1.875% Notes
due Feb. 1, 2016
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Deutsche Bank Trust Company Bond Debt $78,617,000
Americas, as Indenture
Trustee for 9% Notes
due June 20, 2038
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, NY 10005
Fax: (212) 250-0677
Headstrong Services, LLC Unknown $3,936,074
4035 Ridge Top Rd Ste 300
Fairfax, VA 22030
Tel: (703) 272-6700
Fax: (703) 272-2000
CNBC Unknown $845,397
c/o NBC Universal CFS
Bank of America
NBC Universal Lock Box
#402971
Atlanta, GA 30384-2971
10 Fleet Pl
London, EC4M7QS GB
Phone: 0207 653 9300
Sullivan & Cromwell LLP Unknown $596,939
125 Broad St
New York, NY 10004-2498
Tel: (212) 558-4000
Fax: (212) 558-3588
Caplin Systems Limited Unknown $427,520
Cutlers Court, 115
Houndsditch
London EC3A 7BR GB
Wachtell, Lipton, Unknown $388,000
Rosen & Katz
51 W 52nd St
New York, NY 10019
Tel: (212) 403-1000
Fax: (212) 403-2000
Linklaters LLP Unknown $348,000
1345 Avenue of the Americas
New York, NY 10105
Tel: (212) 903-9000
Fax: (212) 903-9100
PricewaterhouseCoopers LLP Unknown $312,598
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 596-8000
Fax: (813) 286-6000
Dean Media Group Unknown $309,000
560 W Washington
Blvd Ste 420
Chicago, IL 60605
Oracle Corporation Unknown $302,704
500 Oracle Pkwy
Redwood Shores, CA 94065
Tel: (916) 315-4305
Fax: (650) 506-7200
ForwardThink Group Inc. Unknown $278,825
112 Candido Ct.
Manalapan, NJ 07726
Tel: (646) 873-6530
Bloomberg Finance LP Unknown $276,064
731 Lexington Ave.
New York, NY 10022
Fax: (917) 369-5000
The Gate Worldwide Unknown $229,739
(S) Pte Ltd
11 E 26th St Fl 14
New York, NY 10010-1422
Fax: (212) 508-3543
52 Craig Rd
Singapore 89690
Lever Interactive Unknown $178,900
1431 Opus Pl Ste 625
Downers Grove, IL 60515
Braxton Group LLC Unknown $172,325
7 Bridge View Dr
New Fairfield, CT 06812
Tel: (203) 312-9200
Forum Group Unknown $154,300
260 Madison Ave # 200
New York, NY 10016-2401
Tel: (212) 687-4050
Fax: (917) 256-0314
Shearman & Sterling Unknown $135,500
599 Lexington Ave
New York, NY 10022
Tel: (212) 848-4000
Fax: (212) 848-7179
RR Donnelly Unknown $118,600
111 South Wacker Dr
Chicago, IL 60606
Tel: (312) 326-8000
Fax: (212) 503-1344
Infinia Group LLC Unknown $115,001
515 West 20th St Fl 3
New York, NY 10011
Tel: (212) 463-5100
Directors Fees Unknown $105,000
717 Fifth Ave
New York, NY 10022
ADK America Inc. Unknown $101,958
515 West 20th St Fl 6 East
New York, NY 10011
3137 S La Cienega Blvd
Los Angeles, CA 90016
Alvarez & Marsal Tax Unknown $65,000
Advisory Services LLC
600 Lexington Ave Fl 6
New York, 10022 10017
Tel: (212) 759-4433
Fax: (212) 328-8757
The Global Capital Unknown $63,250
Group, Ltd
88 W Schiller Ste 3008
Chicago, IL 60610
Tel: (312) 451-2676
Access Search Inc. Unknown $61,440
218 N Jefferson Ste 302
Chicago, IL 60661
Tel: (312) 930-1034
Fax: (312) 930-1070
Holland & Knight Unknown $59,000
Attn Bill Honan,
Executive Partner
31 W 52nd St
New York, NY 10019
Tel: (212) 513-3200
Fax: (212) 385-9010
JVKellyGroup Inc. Unknown $56,760
145 E Main St
Huntington, NY 11743
Tel: (631) 427-2888
Fax: (631) 427-0266
Willis of New York, Inc. Unknown $49,850
200 Liberty St Fl 7
New York, NY 100281-0001
Tel: (212) 344-8888
Fax: (212) 915-8511
Fleishman Hillard Inc. Unknown $42,000
4706 Paysphere Cir
Chicago, IL 60674
Tel: (314) 982-1700
Fax: (314) 231-2313
American Express Company Unknown $40,000
Corporate Services Operations
AESC-P
20022 N 31st Ave
Mail Code AZ-08-03-11
Phoenix, AZ 85027
Tel: (800) 528-2122
Other Regrsn Unknown $37,280
111 South Wacker Dr
Chicago, IL 60606
Tel: (312) 326-8000
Technology Management Unknown $34,000
Consulting Group
DBA Roadmap Learning
235 Iris Rd
Lakewood, NJ 08701
Eloqua Corporation Unknown $33,000
1921 Gallows Rd Ste 250
Vienna, VA 22182-3900
Fax: (302) 655-5049
GKH Law Offices Unknown $30,074
One Azrieli Center,
Round Bldg
Tel Aviv 67021 Israel
Phone: 972-3-607-4444
Fax: 972-3-607-4422
1 Shmuel Ha'Nagid Street,
4th Fl
Jerusalem 94592 Israel
Phone: 972-2-623-2683
Fax. 972-2-623-6082
The Siegfried Group LLP Unknown $30,000
1201 Market St Ste 700
Wilmington, DE 19801-1147
Synechron (Synechron Inc.) Unknown $29,740
15 Corporate Pl S Ste 400
Piscataway, NJ 08854
Tel: (732) 562-0088
Fax: (732) 562-1414
Amideo and Associates Unknown $27,300
787 S Shore Drive
Miami Beach, FL 33141
Tel: (305) 519-5377
BTA Unknown $26,978
Promontory Financial Unknown $25,000
Group LLC
1201 Pennsylvania Ave
NW Ste 617
Washington, DC 20004-2401
Tel: (202) 662-6980
Fax: (202) 783-2924
Media Two Unknown $25,000
319 W Martin St Ste 200
Raleigh, NC 27601
Tel: (919) 553-1246
Ticker Consulting LLC Unknown $22,800
3 Cypress Dr
Cedar Knolls, NJ 07927
Adscom Solutions LLC Unknown $19,440
Attn: Andre Pires
201 East 12 St
New York, NY 10003
Premiere Global Unknown $18,227
Services Inc.
The Terminus Building
3280 Peachtree Rd NE Ste 1000
Atlanta, GA 30305
Tel: (866) 548-3203
Fax: (404) 262-8540
Paul Hastings Unknown $11,646
Attn Barry Brooks
75 East 55th Street
New York, NY 10022
Tel: (212) 318-6000
Fax: (212) 319-4090
Fox Rothschild, LLP Unknown $11,645
Attn: Accounts Payable - 01
2000 Market St Fl 20
Philadelphia, PA 19103-3222
Tel: (215) 299-2000
Fax: (215) 299-2150
KPMG LLP Unknown $10,000
Dept. 0511
POB 120001
Dallas, TX 75312-0511
Fax: (212) 758-9819
Stephanie G. Schrock Unknown $10,000
7716 N Paulina St Unit 1N
Chicago-Rogers Park, IL 60626
-----------------------------------------------------------------
[00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK
-----------------------------------------------------------------
The Debtors disclose that these entities beneficially own in
excess of 5% of any class of voting stock in MF Global Holdings
Ltd. as of Sept. 30, 2011:
Amount and
Nature of Percentage
Name and Address of Beneficial of Common
Beneficial Owner Ownership Stock
------------------- ---------- ----------
FMR LLC 13,917,938 8.44%
c/o Pyramis Global
Advisors, LLC
900 Salem Street
Smithfield, RI, 02917
Guardian Life Insurance 12,879,811 7.81%
Company
c/o RS Investments
388 Market Street
Suite 1700
San Francisco, CA 94111
Fine Capital Partners, L.P. 21,504,101 7.37%
590 Madison Avenue, 5th Floor
New York, NY 10022
Cadian Capital 10,180,286 6.17%
Management, LLC
461 Fifth Avenue
24th Floor
New York, NY 10017
TIAA-CREF 9,520,582 5.77%
730 Third Avenue
New York, NY 10017
Piper Jaffray Companies 9,132,597 5.54%
c/o Advisory Research, Inc.
180 N. Stetson
Chicago, IL 60601
Dimensional Fund Advisors, LP 8,920,497 5.41%
Palisades West
Building One
6300 Bee Cave Road
Austin, TX 78746
Rydex Security Global 8,456,992 5.13%
Investors, LLC
40 East 52nd Street
16th Floor
New York, NY 10022
-----------------------------------------------------------------
[00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
-----------------------------------------------------------------
MF Global Holdings Ltd. and MF Global Finance USA Inc., sought and
obtained an order from Judge Martin Glenn of the U.S. Bankruptcy
Court for the Southern District of New York providing for the
joint administration of their separate Chapter 11 cases for
procedural purposes.
MF Global Holdings Ltd. is the indirect owner of MF Global Finance
USA Inc. The Debtors assert that they are "affiliates" as the
term is defined in Section 101(2) of the Bankruptcy Code and as
used in Rule 1015(b) of the Federal Rules of Bankruptcy Procedure.
Accordingly, joint administration of the Debtors' cases is
appropriate under Rule 1015(b), the Debtors maintain.
The Debtors further assert that joint administration of their
Chapter 11 cases will save time and money and avoid duplicative
and potentially confusing filings by permitting counsel for all
parties-in-interest to (a) use a single caption on the numerous
documents that will be served and filed in the cases and (b) file
the papers in one case rather than in multiple cases.
In addition, the Debtors aver that joint administration will
protect parties-in-interest by ensuring that parties in each of
the Debtors' Chapter 11 cases will be apprised of the various
matters before the Court in these cases.
The Debtors assured the Court that rights of the creditors of each
of the Debtors will not be adversely affected by joint
administration of the cases inasmuch as the relief sought is
purely procedural and is in no way intended to affect substantive
rights. Each creditor and other party-in-interest will maintain
whatever rights it has against the particular estate in which it
allegedly has a claim or right, the Debtors maintain.
-----------------------------------------------------------------
[00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE
-----------------------------------------------------------------
The Debtors sought and obtained an order from the U.S. Bankruptcy
Court for the Southern District of New York extending the deadline
to file schedules of assets and liabilities, schedules of
executory contracts and unexpired leases, and statements of
financial affairs to Dec. 14, 2011.
Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of
the Federal Rules of Bankruptcy Procedure, the Debtors are
required, within 14 days of the Petition Date, to file with the
Court (a) schedules of assets and liabilities, (b) schedules of
current income and expenditures, (c) statements of financial
affairs, (d) statements of executory contracts and unexpired
leases, and (e) a list of equity security holders. However, Rule
1007(c) of the Federal Rules of Bankruptcy Procedure provides that
an extension of the time for the filing of the Schedules and
Statements may be granted "on motion for cause shown."
Kenneth S. Ziman, Esq., at Skadden Arps Slate Meagher & Flom LLP,
in New York, explains that given the size and complexity of their
businesses, the Debtors have a significant amount of information
to prepare in order to file their Schedules and Statements. He
says that to prepare the required Schedules and Statements, the
Debtors must compile information from books, records and documents
relating to a multitude of transactions at numerous locations.
"Given the limited time available to prepare for the filing of
these cases, the substantial burden placed on management by
commencement of these cases, the competing demands on employees,
the time and attention the Debtors must devote to the
restructuring process, and the fact that certain prepetition
invoices have not yet been received or entered into the Debtors'
financial systems, the Debtors have not had the opportunity to
gather the necessary information to prepare and file their
respective Schedules and Statements," Mr. Ziman tells the Court.
The Debtors believe that the 14-day automatic extension of time to
file the Schedules and Statements provided by Rule 1007(c) will
not be sufficient to permit completion of the Schedules and
Statements.
Accordingly, the Debtors assert that due to the complexity of
their operations, and the substantial burdens already imposed on
the Debtors' management by the commencement of the Chapter 11
cases on an emergency basis, "cause" exists to extend the current
deadline for filing the Schedules and Statements.
-----------------------------------------------------------------
[00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING
-----------------------------------------------------------------
Judge Paul A. Engelmayer of the United States District Court for
the Southern District of New York approved on Oct. 31 the
liquidation of MF Global Inc., which liquidation was initiated by
the Securities Investor Protection Corporation, which maintains a
special reserve fund authorized by Congress to help investors at
failed brokerage firms.
The District Court appointed James W. Giddens as trustee for the
liquidation, and further appointed the law firm of Hughes Hubbard
& Reed as counsel to Mr. Giddens. Mr. Giddens and his law firm
also serve as trustee of the liquidation proceedings of Lehman
Brothers Inc. under the SIPA.
Mr. Giddens may be reached at:
James W. Giddens, Esq.
HUGHES HUBBARD & REED LLP
One Battery Park Plaza
New York, NY 10004-1482
Tel: (212) 837-6060
Fax: (212) 422-4726
E-mail: giddens@hugheshubbard.com
SIPC on Monday filed an application with the United States
District Court for the Southern District of New York for a
declaration that the customers of MF Global Inc. are in need of
the protections available under the SIPA.
Orlan Johnson, board chairman of the Securities Investor
Protection Corporation, said: "When the customers of a failed SIPC
member brokerage firm have left their securities in the custody of
that firm, SIPC acts as quickly as possible to protect those
customers. In this case, SIPC initiated the liquidation
proceeding within hours of being notified by the SEC that a SIPC
case was necessary to protect the investing public."
The trustee is charged with giving notice of the proceeding and
mailing claim forms to the customers and other creditors of the
firm. Information about the case also will be made available on
the Web at http://www.sipc.org/
More information about the MF Global liquidation can also be found
at http://www.mfglobaltrustee.com/ The trustee e-mail address for
inquiries is MFGITrustee@hugheshubbard.com They have all set up a
call center for questions. The number in the U.S. callers is 1-
888-236-0808 and for non-U.S. callers is 1-503-597-5173.
ABOUT SIPC
The Securities Investor Protection Corporation is the U.S.
investor's first line of defense in the event a brokerage firm
fails, owing customers cash and securities that are missing from
customer accounts. SIPC either acts as trustee or works with an
independent court-appointed trustee in a brokerage insolvency case
to recover funds.
The statute that created SIPC provides that customers of a failed
brokerage firm receive all non-negotiable securities -- such as
stocks or bonds -- that are already registered in their names or
in the process of being registered. At the same time, funds from
the SIPC reserve are available to satisfy the remaining claims for
customer cash and/or securities custodied with the broker for up
to a maximum of $500,000 per customer. This figure includes a
maximum of $250,000 on claims for cash. From the time Congress
created it in 1970 through December 2010, SIPC has advanced $1.6
billion in order to make possible the recovery of $109.3 billion
in assets for an estimated 739,000 investors.
MEDIA CONTACT: Ailis Aaron Wolf
(703) 276-3265
aawolf@hastingsgroup.com
All investor inquiries of SIPC should be directed to
asksipc@sipc.org or (202) 371-8300.
* * *
Linda Sandler of Bloomberg News reported that Kevin Bell, senior
associate general counsel of SIPC, said MF Global Inc. customers
have been calling the agency's Washington offices asking for their
money.
"What customers ask is, 'When am I getting my money?'," said Mr.
Bell. "You tell them to sit tight, and start gathering their
information so they can file claims. Canceled checks, trade
confirmations, account statements."
Mr. Giddens also served as trustee overseeing the Lehman Brothers
Inc. brokerage firm's liquidation. In the Lehman case, it took
about 30 days to get claim forms out "because of the complexity,"
Mr. Bell said, according to Bloomberg. Claim forms were mailed
about 17 days after con man Bernard Madoff's firm went into
liquidation in 2008, Mr. Bell related.
The Lehman Brothers Holdings Inc. unit has been in liquidation
since 2008 after its parent filed for bankruptcy with $639 billion
in assets.
"This is like a mini-Lehman," Mr. Bell told Bloomberg. "We have
to get control of the books and records. We have to get the names
off the books and records."
When broker-dealers are liquidated, customer accounts often go to
other firms, sometimes in "bulk transfers," Mr. Bell added.
Barclays Plc (BARC) took over accounts from Lehman's brokerage,
giving 72,000 brokerage customers access to $40 billion in frozen
assets.
The New York-based parent company broke rules about keeping
clients' collateral separate from its own accounts, futures
exchange CME Group Inc. said, according to Bloomberg.
Mr. Giddens, according to Bloomberg, said he is "taking steps" to
protect customers and set up an "orderly and fair" process to
satisfy their claims. He and his team plan to be on the company's
premises to provide oversight, he said in a statement, Bloomberg
noted. SIPC had lawyers in New York and has "flown in" an
operations vice president to work with [Mr.] Giddens, Mr. Bell
told Bloomberg.
"The trustee is trying to get a clamp on the assets," Mr. Bell
said. "We're looking at the next 10 days being very hectic." He
declined to comment on any missing funds, according to Bloomberg.
-----------------------------------------------------------------
[00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK
-----------------------------------------------------------------
NEW YORK -- November 1, 2011 -- NYSE Regulation, Inc., said
it determined that the common stock of MF Global Holdings Ltd. --
ticker symbol MF -- should be suspended immediately.
NYSE Regulation has determined that the Company is no longer
suitable for listing. This decision was reached in view of the
fact that both it and its MF Global Finance USA Inc. subsidiary
filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy
Code with the U.S Bankruptcy Court for the Southern District of
New York on October 31, 2011. In addition, NYSE Regulation noted
the uncertainty as to the timing and outcome of the bankruptcy
process, as well as the ultimate effect of this process on the
Company's common stockholders.
Separately, as part of its assessment, NYSE Regulation also
considered the Company's most recently filed quarterly net loss
for the period ended September 30, 2011, as well as recent credit
rating agency downgrades during the week of October 24, 2011, and
the ongoing liquidity position of the Company.
NYSE Regulation also reviewed an October 31, 2011
announcement from the Securities Investor Protection Corporation,
indicating that it was initiating the liquidation of MF Global
Inc., the Company's brokerage subsidiary, under the Securities
Investor Protection Act.
The Company has a right to a review of this determination by
a Committee of the Board of Directors of NYSE Regulation.
Application to the Securities and Exchange Commission to delist
the issue is pending the completion of applicable procedures,
including any appeal by the Company of the NYSE Regulation staff's
decision. The NYSE noted that it may, at any time, suspend a
security if it believes that continued dealings in the security on
the NYSE are not advisable.
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[00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D'
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Standard & Poor's Ratings Services on Oct. 31 lowered its
counterparty credit rating on MF Global to 'D' from 'BBB-'. "At
the same time, we lowered the company's debt ratings to 'D'. We
are removing the ratings from CreditWatch where they were placed
on Oct. 26, 2011, with negative implications," S&P said.
MF Global filed for Chapter 11 bankruptcy protection in a New York
bankruptcy court early Monday. Standard & Poor's placed MF Global
on CreditWatch negative on Oct. 26, 2011, following the company's
announcement of a large generally accepted accounting principles
loss for its second fiscal quarter of 2012 (quarter ended Sept.
30, 2011). "The CreditWatch placement reflected our view that the
company would be unable to generate near-term profitability and
that there would be potential funding pressure as confidence in
the company eroded," S&P said.
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[00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service on Oct. 27 downgraded the long-term
ratings of MF Global Holdings Ltd., including its senior,
unsecured debt rating to Ba2 from Baa3. The ratings remain under
review for possible further downgrade.
RATINGS RATIONALE
Moody's Investors Service downgraded the long-term ratings of MF
Global Holdings Ltd., including its senior, unsecured debt rating
to Ba2 from Baa3. The ratings remain under review for possible
further downgrade.
Moody's said the downgrade reflects Moody's view that MF Global's
weak core profitability contributed to it taking on substantial
risk in the form of its exposure to European sovereign debt in
peripheral countries. At the end of the second quarter, MF
Global's $6.3 billion sovereign risk exposure represented 5 times
the company's tangible common equity, Moody's noted.
"The tactical decision to assume this outsized proprietary
position, highlights the core profitability challenges faced by MF
Global and the scope of the re-engineering challenge facing the
firm's management," said Al Bush, a Moody's senior analyst.
Moody's believes that the risk appetite revealed by this position,
in tandem with the significant quarterly loss that MF Global
reported, subjects the firm to a heightened risk of loss of client
and counterparty confidence -- and could thus further challenge
the company's franchise.
The review for downgrade will focus on MF Global's ability to
manage its franchise risk, including its success in retaining
customers, counterparties and employees during the current
stressed environment.
Moody's noted that the Ba2 rating is supported by the firm's
adequate liquidity profile and price transparency of a majority of
the firm's assets.
The last rating action on MF Global was on October 24, 2011, when
Moody's downgraded the long-term issuer ratings to Baa3 from Baa2
and placed the ratings under review for further downgrade.
MF Global is headquartered in New York.
The principal methodology used in this rating was Global
Securities Industry Methodology published in December 2006.
Downgrades:
Issuer: MF Global Holdings Ltd.
-- Issuer Rating, Downgraded to Ba2 from Baa3
-- Multiple Seniority Shelf, Downgraded to (P)Ba2, (P)Ba3,
(P)B1 from (P)Baa3, (P)Ba1, (P)Ba2
-- Pref. Stock Preferred Stock, Downgraded to B1 from Ba2
-- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to
Ba2 from Baa3
-- Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2
from Baa3
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[00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2'
-----------------------------------------------------------------
Fitch Ratings on Oct. 27 has downgraded the ratings of MF Global
Holdings Ltd. (MF) including the company's Issuer Default Ratings
(IDR) to 'BB+/B' from 'BBB/F2'. At the same time, Fitch has placed
the ratings on Rating Watch Negative.
This rating actions reflect MF's continued challenges in
establishing a sustainable level of profitability and improving
its leverage profile. The low interest rate environment, which is
expected to last over the medium term, and reduced commissions are
hindering profitability in the firm's traditional clearing
activities. Further, volatile capital markets present MF with
significant headwinds in executing its strategic transformation
from a pure broker to a broker-dealer and, longer term, to a full
investment bank without outsized incremental risk.
In addition, the firm's increase in principal and, to a lesser
extent, proprietary trading activities has elevated the firm's
traditional risk profile. These increased risk taking activities
have resulted in sizeable concentrated positions relative to the
firm's capital base, leaving MF vulnerable to potential credit
deterioration and significant margin calls. While Fitch notes
that the firm has made some progress in rationalizing its capital
structure, the firm's persistently weak earnings and leverage are
no longer consistent with an investment grade financial
institution.
Fitch expects to resolve the Rating Watch Negative on MF's ratings
as the firm concludes the evaluation of various strategic options.
Contemplated strategic initiatives include efforts to build scale
in its futures commission merchant (FCM) and the disposition of
assets, which could impact capitalization as well as the company's
earnings profile. The resolution of the Rating Watch Negative
could result in a ratings affirmation or a further downgrade of
MF's ratings.
MF Global Holdings Ltd. is a leading futures and options broker
with subsidiaries in major financial hubs. Its main subsidiaries
are registered futures commissions merchants and broker/dealers.
MF is heavily regulated as a member of commodities, futures, and
securities exchanges in the U.S., Europe and the Asia-Pacific
region.
Fitch has downgraded the following ratings for MF Global Holdings
Ltd.:
-- Long-term IDR to 'BB+' from 'BBB'; Rating Watch Negative;
-- Short-term IDR to 'B' from 'F2'; Rating Watch Negative;
-- Senior debt to 'BB+' from 'BBB'; Rating Watch Negative;
-- Preferred to 'B+' from 'BB+'; Rating Watch Negative.
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[00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS
-----------------------------------------------------------------
DULLES, Virginia -- Nov. 1, 2011 -- Shocking details
surrounding the surprise bankruptcy of securities firm giant MF
Global Holdings Ltd. were coming to light Tuesday, one day after
the company turned in its Chapter 11 papers following an ill-timed
bet on the European debt markets.
While trading exchanges all over the globe rushed to protect
their markets from the fallout, reports began to surface that the
firm, which is headed by former New Jersey Gov. Jon Corzine, had
failed to keep the company's money separate from its customers'
accounts. There were anecdotal reports that hundreds of millions
of MF Global customers' dollars are currently missing, according
to Natural Gas Intelligence (NGI). Subsequent reports said the
number could be even larger. In its bankruptcy filing to the
United States Bankruptcy Court for the Southern District of New
York on Monday, MF Global said the company had debt of $39.7
billion and assets of $41 billion.
"The MF Global story is a fast-moving one. Tuesday morning
people were saying a couple hundred million dollars of customer
funds were missing. By Tuesday afternoon that number had
ballooned to $700 million," said Ed Kennedy, a broker with INTL
Hencorp Futures LLC. "This MF Global implosion will change the
entire game because something is not passing the smell test here.
Moving customer funds into the company's account is not a one-
person operation. With the way regulations are now, an entire
chain of people would have to be involved . . . and each one of
those people sat through the ethics class. Also, what about the
exchanges? What about their clearing operations? They know what
is supposed to be in that segregated customer account."
Kennedy said the shake-up and resulting investigation will
certainly impact how the Dodd-Frank regulatory reform rules are
written and implemented. "I guarantee a month from now this is
what everyone is going to be talking about, and we'll take a look
at it at our hedging seminar in Chicago in December," he said.
Giving tips and teaching people how to use market tools to
their advantage in today's market, Kennedy and his colleague Tom
Saal will host a seminar: "Where the Market is Going and What Can
You Do About It?" seminar Dec. 7-9 in Chicago. Visit
http://seminar.intelligencepress.com/Hedging2011/ for more
information.
In responding to the MF Global crisis, trading exchanges such
as CME Group, Nymex and ICE said Monday they were accepting
"liquidation only" orders from MF Global clients and have
restricted electronic access to their markets. In a statement on
its Web site, MF Global said, "This means that you may place
offsetting orders for current open positions at MF Global but may
not place any new orders. Performance of your trades is
guaranteed by exchange clearinghouses."
During a 3Q2011 earnings conference call, CME Group CEO Craig
Donohue said the exchange will no longer recognize MF Global or
any of its divisions as a guarantor for purposes of floor trading
privileges. "Throughout the day [Monday] our team worked closely
with the firm, public customers and exchange members to assist
customers in establishing new accounts in dealing with open
positions and market exposures," Donohue said, adding that Monday
was a "very difficult day for all concerned."
For its part, ICE said MF Global is accepting and processing
liquidating orders from customers with outstanding open positions
in ICE Futures U.S. Inc. contracts.
The Commodity Futures Trading Commission and Securities and
Exchange Commission said Tuesday they had determined that a
bankruptcy proceeding led by the Securities Investor Protection
Commission (SIPC) would be "the safest and most prudent course of
action to protect customer accounts and assets." SIPC announced
Tuesday that it is initiating the liquidation of MF Global under
the Securities Investor Protection Act.
About the Natural Gas Futures Price Seminar
Saal and Kennedy will be taking time off from active natural
gas futures trading, in a repeat of the very popular Natural Gas
Futures Hedging Seminar, at the JW Marriott Chicago, Dec. 7-9,
2011. For more information visit
http://seminar.intelligencepress.com/hedging2011/
*** End of Issue No. 1 ***
Dynegy Bankruptcy News, Issue No. 1 -- FREE COPY
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DYNEGY BANKRUPTCY NEWS Issue Number 1
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Copyright 2011 (ISSN XXXX-XXXX) November 8, 2011
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Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001
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DYNEGY BANKRUPTCY NEWS is published by Bankruptcy Creditors'
Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania
19030, on an ad hoc basis (generally every 10 to 20 days) as
significant activity occurs in the Debtors' cases. New issues
are prepared by Neil U. Lim, Psyche A. Castillon and
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IN THIS ISSUE
-------------
[00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS
[00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS
[00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING
[00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011
[00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE
[00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
[00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES
KEY DATE CALENDAR
-----------------
11/07/11 Voluntary Chapter 11 Petition Date
11/21/11 Deadline to File Schedules of Assets and Liabilities
11/21/11 Deadline to File Statement of Financial Affairs
11/21/11 Deadline to File Lists of Contracts and Leases
12/07/11 Deadline to Provide Utilities with Adequate Assurance
02/05/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027
03/06/12 Expiration of Debtors' Exclusive Plan Proposal Period
03/06/12 Deadline to Make Decisions About Lease Dispositions
05/05/12 Expiration of Debtors' Exclusive Solicitation Period
11/06/13 Deadline for Debtors' Commencement of Avoidance Actions
Organizational Meeting to Form Creditors' Committees
First Meeting of Creditors under 11 USC Sec. 341
Bar Date for filing Proofs of Claim
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[00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS
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We have published similar newsletters tracking billion-dollar
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DYNEGY BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited.
Distribution to multiple individuals at the same firm is provided
at no additional charge; folks outside of your firm should set-up
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[00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS
-----------------------------------------------------------------
Dynegy Holdings, LLC
1000 Louisiana, Suite 5800
Houston, Texas 77002
Tel: 713-507-6400
http://www.dynegy.com/
Dynegy Holdings, LLC and its subsidiaries' primary business is the
production and sale of electric energy, capacity and ancillary
services from a fleet of 10 operating power plants in six states
totaling roughly 9,903 MW of generating capacity. Dynegy Holdings
is a holding company and conducts substantially all of its
business operations through its subsidiaries.
Dynegy Holdings' direct operations consist of only two plants
-- at Dynegy Danskammer and Dynegy Roseton -- which have a
combined generating capacity of 1,693 MW, despite the size of
Dynegy Holdings' footprint and generating capacity across its
subsidiaries' enterprise.
Dynegy Holdings is a direct subsidiary of Dynegy Inc., and is the
direct or indirect parent of Dynegy Roseton, L.L.C., Dynegy
Danskammer, L.L.C., Hudson Power, L.L.C., and Dynegy Northeast
Generation, Inc.
The business operations of Dynegy Northeast Generation and Hudson
Power are wholly conducted through Dynegy Roseton and Dynegy
Danskammer at their power generation facilities in New York.
The DH Companies employ 152 full-time employees, of whom 126 are
represented by Local Union 320 of the International Brotherhood of
Electrical Workers, AFL-CIO. The remaining employees are not
represented by a union and are predominantly administrative and
managerial employees. All of these employees are employed in
connection with the operation of the Danskammer and Roseton power
generation facilities, and all but one are employees of Dynegy
Northeast.
Prepetition Indebtedness
As of Nov. 7, Dynegy Holdings is a wholly-owned subsidiary of
Dynegy Inc., with Dynegy Inc. holding 100% of the membership
interests in Dynegy Holdings. The remaining Debtors are wholly-
owned direct or indirect subsidiaries of Dynegy Holdings.
Dynegy Holdings, as of Nov. 7, has roughly $3.570 billion in
outstanding unsecured indebtedness arising under seven different
series of notes, debentures, and subordinated capital income
securities, with varying maturities.
A. Senior Unsecured Notes/Debentures
Dynegy Holdings has, from time to time, issued various series of
senior unsecured notes under the Indenture dated September 26,
1996, as amended and restated as of March 23, 1998, as amended and
restated as of March 14, 2001, and under the First through Sixth
Supplemental Indentures, between Dynegy Holdings and Wilmington
Trust Company (as successor to JP Morgan Chase Bank, N.A.,
successor to Bank One Trust Company, National Association).
These series of notes issued under the Indenture are outstanding:
-- 8.75% senior unsecured notes in the outstanding aggregate
principal amount of $88.5 million, due February 15, 2012;
-- 7.5% senior unsecured notes in the outstanding aggregate
principal amount of $785 million, due June 1, 2015;
-- 8.375% senior unsecured notes in the outstanding aggregate
principal amount of $1.046 billion, due May 1, 2016;
-- 7.75% senior unsecured notes in the outstanding aggregate
principal amount of $1.1 billion, due June 1, 2019;
-- 7.125% senior debentures in the outstanding aggregate
principal amount of $175 million due May 15, 2018; and
-- 7.625% senior debentures in the outstanding aggregate
principal amount of $175 million due October 15, 2026.
B. Subordinated Debentures
In May 1997, NGC Corporation Capital Trust I issued Series A
8.316% Subordinated Capital Income Securities through a Rule 144A
offering to qualified institutional buyers. In September 1997,
Series B 8.316% SKIS were exchanged for the outstanding Series A
8.316% SKIS. The Series B 8.316% SKIS in the aggregate principal
amount of $200 million due June 1, 2027 remain outstanding, and
are an unsecured obligation of Dynegy Holdings. The SKIS rank
subordinate and junior in right of payment to all senior
indebtedness of Dynegy Holdings.
C. Bilateral Contingent LC Facility
On May 21, 2010, Dynegy Holdings executed a $150 million unsecured
bilateral contingent letter of credit facility with Morgan Stanley
Capital Group Inc. Availability under the facility is tied to
increases in spark spreads and power prices for 2012 positions.
The facility matures on December 31, 2012. A facility fee accrues
on the unutilized portion of the facility at an annual rate of
0.6% and letters of credit availability accrue fees at an annual
rate of 7.25%.
There are currently no amounts outstanding under the facility.
(ii) $1.25 Billion Intercompany Promissory Note
On September 1, 2011, Dynegy Holdings issued a $1.25 billion
promissory note to its non-debtor subsidiary, Dynegy Gas
Investments, LLC, in exchange for DGIN transferring to Dynegy
Holdings its rights in an undertaking in the same amount. The
Promissory Note bears annual interest at a rate of 4.24%, payable
upon the maturity date, September 1, 2027.
(iii) Cash Collateralized Letter of Credit Facility
On August 5, 2011, Dynegy Holdings and Credit Suisse AG, Cayman
Islands Branch, entered into a Letter of Credit Reimbursement and
Collateral Agreement for a $26,217,318 cash collateralized Letter
of Credit Facility under which Credit Suisse Cayman would maintain
five then-existing letters of credit, one of which expired on
October 28, 2011. The letters of credit under the LC Facility are
issued (i) to various New York state regulatory agencies for
certain environmental liabilities related to Dynegy Danskammer and
(ii) to backstop certain obligations under the Debtors' workers
compensation insurance programs, as well as various surety bonds
posted in connection with litigation matters. The LC Facility is
collateralized by an account maintained by Bank of New York Mellon
holding the sum of $27,003,837, which amount may be withdrawn only
in accordance with the LC Agreement.
(iv) Credit Agreement
On April 2, 2007, Dynegy Holdings, Dynegy Inc. as guarantor, and
certain of their direct and indirect subsidiaries entered into a
Fifth Amended and Restated Credit Agreement. Under the Credit
Agreement, Dynegy Holdings had access to a $1.15 billion revolving
credit facility, an $850 million term letter of credit facility,
and a $70 million senior secured term loan facility. The
obligations under the Credit Agreement were secured by
substantially all of the assets of Dynegy Holdings. The
obligations under the Credit Agreement were guaranteed by Dynegy
Inc. and by certain of their direct and indirect subsidiaries, and
secured by substantially all of the assets of the guarantors.
Dynegy Holdings repaid all obligations under the Credit Agreement
in August 2011.
(v) Danskammer and Roseton Leases
In May 2001, in connection with the acquisition of the Roseton and
Danskammer power generation facilities, Dynegy Danskammer and
Dynegy Roseton each entered into a sale-leaseback transaction
pertaining to, Danskammer power-generating Units 3 and 4 and
Roseton power-generating Units 1 and 2.
Owner Lessors purchased the Danskammer Facility and the Roseton
Facility, and in each case an interest in the related common
facilities. The Owner Lessors are subsidiaries of Resource
Capital Management Corporation, an unrelated third party investor
and a wholly-owned subsidiary of PSEG Resources Inc.
The purchase price with respect to the Danskammer Leased Facility
was approximately $300 million. The purchase price with respect
to the Roseton Leased Facility was approximately $620 million. To
fund their purchases of the Leased Facilities, the Owner Lessors
used $138 million in equity funding from certain of the other PSEG
Entities, and financed the remaining $800 million of the purchase
price and the related transaction expenses through a private
offering of pass-through trust certificates, which were sold to
qualified institutional buyers.
Each of the Owner Lessors simultaneously leased its Leased
Facility to Dynegy Danskammer and Dynegy Roseton pursuant to a
facility lease. The Danskammer Lease expires May 8, 2031 and the
Roseton Lease expires on February 8, 2035.
The Lessees must make periodic rent payments on May 8 and November
8 of each year, Dynegy Danskammer through 2030 and Dynegy Roseton
through 2034. Any payments by the Lessees or the Guarantor are
applied pro rata to the Facility Leases, and neither Facility
Lease may be preferred over the other. The next three rent
payments due for each Leased Facility, as well as the total rent
payments remaining until the end of the Lease terms, are:
11/08/11
through end
Facility 11/08/11 05/08/12 11/08/12 of term
-------- -------- -------- -------- -----------
Danskammer $3,888,713 $3,888,713 $78,574,842 $102,991,141
Roseton $78,594,126 $51,629,366 $44,623,745 $691,030,741
----------- ----------- ----------- ------------
Total $82,482,840 $55,518,080 $123,198,587 $794,021,882
Under the sale-leaseback arrangements, the rent payments paid by
the Lessees are assigned to the Indenture Trustee for the
respective Facility. The Indenture Trustee then pays a portion of
that payment to each of two pass-through trusts, the Series A
Pass-Through Trust and the Series B Pass Through Trust. The Pass-
Through Trusts pay these amounts to the Pass-Through Certificate
Holders. Amounts paid in excess of the amounts due to the Pass-
Through Certificate Holders are paid by the Indenture Trustee to
the Owner Lessor Entity for the respective Leased Facility.
The Series A Trust certificates, representing a total obligation
of $250 million, bore interest at 7.27%, and had a final
distribution on November 8, 2010 and have been defeased. The
Series B Trust certificates, representing a total obligation of
$550.4 million, bear interest at 7.67%, and have a final
distribution on November 8, 2016. The current total outstanding
principal of the Series B Trust certificates as of Nov. 7 is
$550.4 million.
ROAD TO BANKRUPTCY
Dynegy Holdings has faced a number of issues, including (i)
decreasing liquidity due to declining revenues resulting from
sustained low power prices over the past two years, (ii) an over-
leveraged balance sheet, and (iii) economically unfavorable leases
for the Leased Facilities.
According to Kent R. Stephenson, executive vice president of DHI,
sustained low power prices over the past two years have had a
significant adverse impact on the Companies' business and continue
to negatively impact their projected future liquidity.
Specifically, Dynegy Holdings' annual consolidated revenue peaked
in the year ending December 31, 2008 (FY08) at $3.324 billion, and
has since declined to $2.468 billion in FY09 and $2.323 billion in
FY10. As further illustration of the steep decline in revenue,
for the six-month period ending June 30, 2010, Dynegy Holdings
reported consolidated revenues of $1.097 billion, and for the six-
month period ending June 30, 2011, Dynegy Holdings reported
consolidated revenues of $831 million.
In August 2010, Dynegy Inc. struck a deal to be acquired by an
affiliate of The Blackstone Group at $4.50 a share or roughly $4.7
billion. That offer was raised to $5.00 a share in November.
Through Carl Icahn and investment fund Seneca's efforts,
shareholders thumbed down both offers.
In December 2010, an affiliate of Icahn commenced a tender offer
to purchase all of the outstanding shares of Dynegy common stock
for $5.50 per share in cash, or roughly $665 million in the
aggregate. In February 2011, Icahn Enterprises L.P. terminated
the proposed merger agreement with the Company after it failed to
garner the required number of shareholder votes. The Companies
also eliminated approximately 135 positions across all functional
and geographic areas, resulting in an expected annual savings of
approximately $50 million, Mr. Stephenson related.
Goldman, Sachs & Co. and Greenhill & Co., LLC, served as financial
advisors and Sullivan & Cromwell LLP served as legal counsel to
Dynegy on the sale efforts. Houlihan Lokey, according to a report
by the Journal, is advising Dynegy creditors.
In the past months, a finance and restructuring committee was
created to undertake a comprehensive review of Dynegy's various
restructuring alternatives, including, without limitation, if
appropriate, reviewing and evaluating (i) possible changes to the
capital structure of Dynegy, including the issuance, repurchase or
prepayment of indebtedness or equity securities and (ii) possible
sales of Dynegy's assets.
The committee is chaired by Vincent J. Intrieri. Other directors
on the committee are Thomas W. Elward, E. Hunter Harrison and
Samuel Merksamer.
August 2011 Reorganization
On August 4, 2011, Dynegy Inc., Dynegy Holdings, and certain of
their direct and indirect subsidiaries underwent a reorganization
and restructuring to, among other things, facilitate certain
credit facilities and maximize their flexibility to address
leverage and liquidity issues and to preserve the value of their
assets.
As part of the reorganization, Dynegy Holdings and its
subsidiaries effected transactions to cause:
-- substantially all of the coal-fired power generation
facilities to be held by Dynegy Midwest Generation, LLC, an
indirect subsidiary of Dynegy Holdings;
-- substantially all of the gas-fired power generation
facilities to be held by Dynegy Power, LLC, an indirect
subsidiary of Dynegy Holdings; and
-- 100% of the ownership interests of Dynegy Northeast
Generation, the entity that indirectly holds the equity
interest in the subsidiaries that operate the Roseton and
Danskammer power generation facilities, to be held directly
by DHI.
As a result of the reorganization, GasCo owns a portfolio of eight
primarily natural gas-fired intermediate (combined cycle) and
peaking (combustion and steam turbines) power generation
facilities diversified across the West, Midwest and Northeast
regions of the United States, totaling 6,771 MW of generating
capacity. CoalCo owns a portfolio of six primarily coal-fired
baseload power generation facilities located in the Midwest,
totaling 3,132 MW of generating capacity.
GasCo and CoalCo are indirect wholly owned subsidiaries of DHI and
were designed to be separately financeable. The Company said
GasCo and CoalCo are bankruptcy remote in order to accommodate the
financings reflected by the credit facilities and to provide the
Company with greater flexibility in its efforts to address
leverage and liquidity issues and to realize value of its assets.
On September 1, 2011, Dynegy Inc. and DGIN, a direct wholly-owned
subsidiary of Dynegy Holdings, entered into a Membership Interest
Purchase Agreement whereby DGIN sold 100% of the outstanding
membership interests of Dynegy Coal HoldCo, LLC, a Delaware
limited liability company and wholly-owned subsidiary of DGIN, to
Dynegy Inc. Coal HoldCo indirectly owns CoalCo.
In exchange for DGIN's membership interests in Coal HoldCo, Dynegy
Inc. issued an undertaking to DGIN pursuant to which Dynegy Inc.
agreed to make certain specified payments over time which coincide
in timing and amount to the payments of principal and interest
that Dynegy Holdings is obligated to make under a portion of its
Old Notes.
DGIN assigned its right to receive payments under the Undertaking
Agreement to Dynegy Holdings in exchange for a promissory note in
the amount of $1.25 billion that matures in 2027. The Note bears
annual interest at a rate of 4.24%, which will be payable upon
maturity. As a condition to Dynegy Inc.'s consent to the
assignment of the Undertaking Agreement, the agreement was amended
and restated to be between Dynegy Holdings and Dynegy Inc. and to
provide for the reduction of Dynegy Inc.'s obligations if the
outstanding principal amount of any of Dynegy Holdings' $3.5
billion of outstanding notes and debentures is decreased as a
result of any exchange offer, tender offer or other purchase or
repayment by Dynegy Inc. or its subsidiaries.
Mr. Stephenson said that by undertaking the corporate and
financial restructuring steps in 2011, Dynegy Holdings and its
affiliated entities were able to avoid defaults under their then-
current financing arrangements, obtain additional liquidity and
flexibility and refinance the obligations outstanding under the
Credit Agreement.
Exchange Offer
In September, Dynegy Inc. offered to pay a combination of cash and
its own new 10% Senior Secured Notes due 2018 in exchange for the
tender of up to $1.25 billion of Old Notes. Total consideration
would range from $400 to $720 per $1,000 principal amount of Old
Notes, and the exact combination of cash and New
Notes would vary, depending on the series of Old Notes being
exchanged and the date of tender. The Exchange Offer, after being
extended several times, was terminated on November 3, 2011.
Holders of an insufficient amount of Old Notes tendered their
notes, and the exchange offer was not consummated.
In light of the failed Exchange Offer, Dynegy Holdings is facing a
liquidity crisis with approximately $43.8 million of unpaid
interest payments due and approximately $278.1 million of interest
payments coming due in the next twelve months. In addition,
approximately $82.48 million in payments are coming due under the
Danskammer and Roseton Facility Leases on November 8, 2011.
To address the issue of Dynegy Holdings' over-leveraged balance
sheet, the Debtors engaged in discussions with holders of its
public bond debt. After extensive negotiations, Dynegy Holdings
was able to reach an agreement with holders of approximately $1.4
billion of Dynegy Holdings' outstanding public bond debt on the
principal terms of a restructuring effectuated through a Chapter
11 plan of reorganization.
As early as March, Dynegy warned shareholders it might be forced
into bankruptcy if it is unable to renegotiate the terms of its
existing debt.
An Unusual Bankruptcy
DHI and four subsidiaries delivered separate voluntary petitions
for bankruptcy under Chapter 11 of the Bankruptcy Code on Nov. 7,
2011, to the U.S. Bankruptcy Court for the Southern District of
New York.
Mike Spector of The Wall Street Journal called DHI's bankruptcy
"unusual" in a way that could cause losses for bondholders without
harming parent-company shareholders that include Carl Icahn and
hedge fund Seneca Capital.
Dynegy's plan to eliminate billions of dollars owed to bondholders
while sparing parent company shareholders flips usual bankruptcy
rules on their head, Mr. Spector pointed out. Creditors are
usually paid first during bankruptcy proceedings and shareholders
often are left with nothing, he noted.
But Dynegy has reorganized its corporate structure in a way that
protects shareholders from a bankruptcy filing, he added.
The Journal noted that the August restructuring left the holding
company without a claim on the coal-powered plants and just
holding Dynegy's bond debt.
The Journal reported on July 29 that Dynegy's restructuring
proposal was pushed by Mr. Icahn. The planned reorganization
would give Dynegy a better chance "to obtain prospective financing
and investment," a Dynegy official told the Journal at that time
in an e-mail.
The Journal noted in that July report that while shareholders of
strong companies, like Liberty Media Corp., have used weak
covenants to sell assets out from under bondholders, no one has
tried the same tactic with a company as distressed as Dynegy for
fear of inviting fraud litigation if it goes bankrupt.
"If you buy bonds without protection, sooner or later the piper
has to get paid," the Journal said, citing Chris Taylor an energy
strategist at FBR Capital.
As an architect of the leveraged-buyout craze in the 1980s, and as
an activist shareholder in more recent decades, Mr. Icahn has
shown himself uniquely willing to play the bond markets in
aggressive ways, the Journal noted. In 2009, for instance, he
played bondholders of CIT Group against each other in an effort to
force a liquidation, even as the $71 billion lender with 5,000
employees struggled to save itself, the report noted.
Mr. Icahn is seeking to salvage his investment in Dynegy after he
blocked a $4.50-per-share buyout bid by Blackstone Group last
year, then had his own $5.50 a share offer rejected.
In July, certain holders of obligations with potential recourse
rights to DHI initiated legal proceedings seeking to enjoin the
parent's restructuring efforts. Plaintiffs in that lawsuit seek
to enjoin the proposed reorganization based on purported breaches
of guarantees issued by DHI in connection with two sale lease back
transactions in which DHI's subsidiaries, Dynegy Roseton, L.L.C.
and Dynegy Danskammer, L.L.C., leased certain power-generating
facilities located in Newburgh, New York.
Restructuring Support Agreement
Mr. Stephenson related that the Debtors filed the Chapter 11 Cases
to implement the Restructuring Support Agreement and the Term
Sheet and address the burdensome lease obligations at Danskammer
and Roseton. He said the RSA, together with the Term Sheet, lays
a solid foundation for a consensual plan of reorganization to be
filed by the Debtors in the Chapter 11 Cases and should
significantly facilitate the proceedings and the Debtors'
objective of preserving and enhancing value for the benefit of
their stakeholders.
The pre-arranged plan calls for, among other things, the exchange
of all unsecured obligations of Dynegy Holdings, including all of
the Old Notes (except for the SKIS), for (a) a $400 million cash
payment; (b) $1 billion aggregate principal amount of senior
secured notes to be issued by Dynegy Inc. or an additional cash
payment of $1 billion, if Dynegy Inc. determines it can obtain the
financing elsewhere on more favorable terms; and (c) $2.1 billion
of convertible PIK notes to be issued by Dynegy Inc.
The RSA contemplates these milestones:
December 7, 2011 Negotiation of definitive documents
March 15, 2012 Approval of Disclosure Statement
explaining a Chapter 11 Plan
June 15, 2012 Confirmation of a Chapter 11 Plan
August 1, 2012 Plan effective date
The parties may terminate the agreement if the definitive
documents are not agreed to or if certain milestones to
consummation are not achieved, Mr. Stephenson said.
A full-text copy of the RSA, dated Nov. 7, 2011, is available for
free at http://bankrupt.com/misc/dynegyrsa.pdf
The bondholders that consented to the restructuring are:
* AEGON USA Investment Management LLC
230 West Monroe, Suite 1450
Chicago, IL 60606
Fax: 800-454-2664
Attn: Jim Schaeffer
E-mail: jschaeffer@aegonusa.com
* Avenue Investments L.P.
Avenue Special Situations Fund VI (Master), LP
Avenue International Master LP
Avenue CDP-Global Opportunities Fund L.P.
c/o Avenue Capital Group
399 Park Avenue, 6th Floor
New York, NY 10022
Fax: 212-850-7506
Attn: Stephen Burnazian
Matthew Kimble
E-mail: sburnazian@avenuecapital.com
mkimble@avenuecapital.com
* Marjner LDC
* Caspian Capital Partners L.P.
Caspian Select Credit Master Fund, Ltd.
Caspian Alpha Long Credit Fund, L.P.
Caspian Solitude Master Fund, L.P.
c/o Caspian Capital L.P.
767 Fifth Avenue, 45th Floor
New York, NY 10153
Fax: 212-826-6980
Attn: Adam S. Cohen
Greg Saiontz
E-mail: adam@caspianlp.com
greg@caspianlp.com
* Franklin Advisers Inc.
One Franklin Templeton Investments
Fax: 916-463-1902
Attn: Ed Perks
E-mail: perksed@frk.com
* Venor Capital Master Fund Ltd.
Times Square Tower
7 Times Square, Suite 3505
New York, NY 10036
Fax: 212-703-2111
Attn: Harlan Cherniak
Michael J. Wartell
John Roth
E-mail: hcherniak@venorcapital.com
mwartell@venorcapital.com
jroth@venorcapital.com
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[00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING
-----------------------------------------------------------------
* DYNEGY INC. ANNOUNCES RESTRUCTURING AGREEMENT WITH HOLDERS
OF OVER $1.4 BILLION OF DYNEGY HOLDINGS, LLC SENIOR NOTES
* Dynegy Holdings LLC and Four Subsidiaries File for Relief
under Chapter 11
* Business continues as usual for Dynegy and All of its
Other Subsidiaries
HOUSTON, Texas -- Nov. 7, 2011 -- Dynegy Inc. (Dynegy)
(NYSE:DYN) announced that it has reached an agreement with a group
of investors holding over $1.4 billion of senior notes issued by
Dynegy's direct wholly-owned subsidiary, Dynegy Holdings, LLC
(DH), regarding a framework for the consensual restructuring of
over $4.0 billion of obligations owed by DH. If this
restructuring support agreement is successfully implemented, it
will significantly reduce the amount of debt on the Company's
consolidated balance sheet. DH and four of its wholly owned
subsidiaries -- Dynegy Northeast Generation, Inc., Hudson Power,
L.L.C., Dynegy Danskammer, L.L.C. (Danskammer) and Dynegy Roseton,
L.L.C. (Roseton) (collectively, the Debtor Entities) --filed
voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York, Poughkeepsie Division in order to
implement the agreement and to address the burdensome lease
obligations at Roseton and Danskammer.
Dynegy and all of its subsidiaries -- other than the Debtor
Entities -- including those that own and operate the Company's
coal-fired and gas-fired businesses that were separately financed
earlier this year and those that provide ancillary services have
not filed for Chapter 11. All such entities continue to operate
their businesses in the ordinary course without any impact from
the limited Chapter 11 filings of DH and its subsidiaries that are
involved with the Roseton and Danskammer facilities.
Robert C. Flexon, President and Chief Executive Officer of
both Dynegy and DH, said, "This marks an important next step in
the Company's ongoing effort to restructure its consolidated
balance sheet and to position its assets in a fashion that will
maximize our operational flexibility. We look forward to working
with our stakeholders to complete and implement this restructuring
support agreement as quickly and efficiently as possible."
Under the restructuring support agreement entered into
between Dynegy, DH and holders of over $1.4 billion of DH's senior
notes, all unsecured obligations of DH, including $3.4 billion of
senior notes, $200 million of subordinated notes, approximately
$130 million of accrued interest, and the payments associated with
the Roseton and Danskammer leases, will be exchanged for:
-- a $400 million cash payment;
-- $1.0 billion of new 7-year 11% secured notes to be issued
by Dynegy and secured by the equity in the Company's
separate coal and gas-fueled generating businesses (or an
additional cash payment of $1.0 billion, if the Company
determines it can obtain the financing elsewhere on more
favorable terms); and
-- $2.1 billion of Dynegy's new convertible PIK notes
maturing on December 31, 2015. Dynegy will have the
right to redeem the notes at varying discounts through
the end of 2013, and can make open market purchases of
the notes with excess cash from operations. At maturity,
the notes would mandatorily convert into 97% of the
common equity of Dynegy to the extent not previously
redeemed or retired. The equity in the Company's
separate coal and gas-fueled generating businesses will
remain direct or indirect subsidiaries of Dynegy.
The holders of DH's Series B 8.316% Subordinated Capital
Income Securities due 2027 would participate in the restructuring
as an unsecured note holder, but their recovery would be subject
to enforcement of their contractual subordination to the senior
unsecured notes. Alternatively, the subordinated note holders
will be offered the opportunity to participate, without
subordination, in the restructuring as an unsecured note holder at
$0.25 for every dollar of claims.
The restructuring support agreement contemplates the
negotiation of definitive documents by December 7, 2011, and that
the transaction will be implemented pursuant to a Chapter 11 plan
for DH that must become effective by August 1, 2012. Interest will
accrue under the new 11% secured notes and the new convertible PIK
notes from the Chapter 11 petition date through the effective
date. The parties may terminate the restructuring support
agreement if the definitive documents are not agreed-to or if
certain other milestones to consummation are not achieved.
The Debtor Entities' only operations consist of those at the
Roseton and Danskammer facilities, which are the subject of leases
that the Debtor Entities are seeking to immediately reject
pursuant to a motion filed in the Bankruptcy Court. The agreement
is also conditioned on the claims against DH arising from the
Roseton and Danskammer leases being fixed by the Bankruptcy Court
at an amount not to exceed $300 million. The Debtor Entities are
prepared to surrender the Roseton and Danskammer facilities upon
entry of an order authorizing the rejection of the leases.
However, applicable federal and state regulatory requirements may
prevent the Debtors from doing so immediately. Therefore, the
Debtor Entities intend to operate the facilities in accordance
with prudent operating standards and to the extent necessary to
comply with applicable federal and state regulatory requirements
until the owners of the leased facilities, which are affiliates of
Public Service Enterprise Group, Inc., are authorized to take
operational control.
The Debtor Entities have also sought customary first-day
relief designed to ensure their smooth transition into Chapter 11
administration. Among other things, this relief, if granted by
the Bankruptcy Court, will ensure that the Debtor Entities have
sufficient cash and liquidity to fund their continuing operations
and all administrative obligations incurred during the Chapter 11
process.
The Company expects to file an 8-K with the SEC prior to
market open on Tuesday, November 8, 2011. This filing will
include the restructuring support agreement and the associated
term sheet.
The Debtor Entities are represented in the Chapter 11
proceedings by Sidley Austin LLP as their reorganization counsel.
Dynegy and its other subsidiaries are represented by White & Case
LLP, who is also special counsel to the Debtor Entities with
respect to the Roseton and Danskammer lease rejection issues.
Dynegy was advised by Lazard Freres & Co. LLC and the Debtor
Entities' financial advisor is FTI Consulting.
ABOUT DYNEGY
Dynegy's subsidiaries produce and sell electric energy,
capacity and ancillary services in key U.S. markets. The Dynegy
Power, LLC power generation portfolio consists of approximately
6,771 megawatts of primarily natural gas-fired intermediate and
peaking power generation facilities. The Dynegy Midwest
Generation, LLC portfolio consists of approximately 3,132
megawatts of primarily coal-fired baseload power plants. The DNE
portfolio consists of approximately 1,693 megawatts from two power
plants which are primarily natural gas-fired peaking and baseload
coal generation facilities.
-----------------------------------------------------------------
[00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011
-----------------------------------------------------------------
Dynegy Inc.
(Unaudited) Condensed Consolidated Balance Sheets
(In millions)
As of June 30, 2011
ASSETS
Current Assets
Cash and cash equivalents $399
Restricted cash and investments 878
Short-term investments 106
Accounts receivable, net 169
Accounts receivable, affiliates -
Inventory 125
Assets from risk-management activities 989
Deferred income taxes 12
Broker margin account 202
Prepayments and other current assets 137
--------
Total Current Assets 3,017
Property, Plant and Equipment 8,700
Accumulated depreciation (2,499)
--------
Property, Plant and Equipment, net 6,201
Other Assets
Restricted cash and investments 9
Assets from risk-management activities 84
Intangible assets 116
Other long-term assets 436
--------
Total Assets $9,863
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $111
Accrued interest 51
Accrued liabilities and other current liabilities 86
Liabilities from risk-management activities 1,043
Notes payable and current portion of long-term debt 1,008
--------
Total Current Liabilities 2,299
Long-term debt 3,852
Long-term debt, affiliates 200
--------
Long-term Debt 4,052
Other Liabilities
Liabilities from risk-management activities 123
Deferred income taxes 509
Other long-term liabilities 321
--------
Total Liabilities 7,304
Commitments and Contingencies
Stockholders' Equity
Common stock 1
Additional paid-in capital 6,071
Subscriptions receivable (2)
Accumulated other comprehensive loss (51)
Accumulated deficit (3,389)
Treasury stock (71)
--------
Total Stockholders' Equity 2,559
--------
Total Liabilities and Stockholders' Equity $9,863
========
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[00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE
-----------------------------------------------------------------
Debtor: Dynegy Holdings, LLC
1000 Louisiana, Suite 5800
Houston, Texas 77002
Tel: 713-507-6400
http://www.dynegy.com/
Bankruptcy Case No.: 11-38111
Debtor-affiliates that filed separate Chapter 11 petitions:
Debtor Case No.
------ --------
Dynegy Roseton, L.L.C. 11-38107
Dynegy Danskammer, L.L.C. 11-38108
Hudson Power, L.L.C. 11-38109
Dynegy Northeast Generation, Inc. 11-38110
Chapter 11 Petition Date: Nov. 7, 2011
Bankruptcy Court: U.S. Bankruptcy Court
Southern District of New York
Debtors'
Counsel: Matthew A. Clemente, Esq.
Paul S. Caruso, Esq.
Brian J. Lohan, Esq.
SIDLEY AUSTIN LLP
One South Dearborn Street
Chicago, IL 60603
Tel: (312) 853-7000
Fax: (312) 853-7036
E-mail: mclemente@sidley.com
pcaruso@sidley.com
blohan@sidley.com
Debtors'
Special
Litigation
Counsel: WHITE & CASE LLP
Debtors'
Financial
Advisor: FTI CONSULTING
Debtors'
Claims and
Noticing
Agent: EPIQ BANKRUPTCY SOLUTIONS
Dynegy Inc.'s
Counsel: Thomas E. Lauria, Esq.
WHITE & CASE LLP
Southeast Financial Center
200 South Biscayne Boulevard
Miami, FL 33131
Fax: (305) 358-5744
E-mail: tlauria@whitecase.com
Counsel to
Noteholders
that signed
the RSA: Andrew N. Rosenberg, Esq.
Alice Belisle Eaton, Esq.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, NY 10019
E-mail: arosenberg@paulweiss.com
aeaton@paulweiss.com
Total Assets: $13.765 billion as of Sept. 30, 2011
Total Debts: $6.181 billion as of Sept. 30, 2011
The Debtor did not file a list of its largest unsecured creditors
together with its petition.
The petition was signed by Catherine B. Callaway, executive vice
president and general counsel.
-----------------------------------------------------------------
[00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
-----------------------------------------------------------------
Dynegy Holdings, LLC, and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Southern District of New York to enter an
order directing the joint administration of their Chapter 11 cases
for procedural purposes.
Joint administration of the bankruptcy cases is warranted, Sophia
P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts.
Joint administration, she says, will avoid the preparation,
replication, service, and filing, as applicable, of duplicative
notices, applications, and orders, thereby saving the Debtors
considerable expenses and resources.
Ms. Mullen assures the Court that the relief requested will not
adversely affect creditors' rights, as the Motion requests only
the administrative, not the substantive, consolidation of the
estates. In fact, she points out, the reduced costs that will
result from the joint administration of these cases will inure to
the benefit of all creditors. She adds that the relief requested
will relieve the Court of the burden of entering duplicative
orders and maintaining duplicative files, as well as simplify
supervision of the administrative aspects of the Chapter 11 cases
by the Office of the United States Trustee.
-----------------------------------------------------------------
[00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES
-----------------------------------------------------------------
The Debtors ask the Court to extend the time within which they may
file their schedules of assets and liabilities, schedules of
current income and expenditures, schedules of executory contracts
and unexpired leases, and statements of financial affairs.
Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of
the Federal Rules of Bankruptcy Procedure, the Debtors are
required to file, within 14 days after the Petition Date, their
(i) schedules of assets and liabilities, (ii) schedules of
executory contracts and unexpired leases, (iii) schedules of
current income and expenditures, and (iv) statements of financial
affairs.
The Debtors ask that the 14-day period be extended by an
additional 31 days, or until Dec. 22, to give the Debtors a total
of 45 days from the Petition Date to file their Schedules and
Statements.
Sophia P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts
that cause exists to extend the deadline for the filing of the
Schedules and Statements, based on the size and complexity of the
Debtors' businesses, the number of the Debtors and the number of
potential creditors of the Debtors, and the numerous burdens
imposed by the Debtors' reorganization efforts, particularly in
the early days of the Chapter 11 cases. The Debtors' management
and employees, together with their outside legal and financial
advisors, have been working diligently to compile the information
necessary for the Schedules and Statements, Ms. Mullen tells the
Court. The magnitude of that task, when taken together with the
considerable effort involved in preparing for the filing of the
Chapter 11 cases, the anticipated burdens of preparing the
Debtors' transition into Chapter 11, and the ongoing burdens of
operating the Debtors' businesses day-to-day, supports an
extension of the deadline set forth in the Bankruptcy Rules for
filing the Schedules and Statements, she maintains.
*** End of Issue No. 1 ***
DYNEGY BANKRUPTCY NEWS Issue Number 1
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Copyright 2011 (ISSN XXXX-XXXX) November 8, 2011
-----------------------------------------------------------------
Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001
-----------------------------------------------------------------
DYNEGY BANKRUPTCY NEWS is published by Bankruptcy Creditors'
Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania
19030, on an ad hoc basis (generally every 10 to 20 days) as
significant activity occurs in the Debtors' cases. New issues
are prepared by Neil U. Lim, Psyche A. Castillon and
Peter A. Chapman, Editors. Subscription rate is US$45 per
issue. Any re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited.
=================================================================
IN THIS ISSUE
-------------
[00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS
[00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS
[00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING
[00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011
[00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE
[00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
[00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES
KEY DATE CALENDAR
-----------------
11/07/11 Voluntary Chapter 11 Petition Date
11/21/11 Deadline to File Schedules of Assets and Liabilities
11/21/11 Deadline to File Statement of Financial Affairs
11/21/11 Deadline to File Lists of Contracts and Leases
12/07/11 Deadline to Provide Utilities with Adequate Assurance
02/05/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027
03/06/12 Expiration of Debtors' Exclusive Plan Proposal Period
03/06/12 Deadline to Make Decisions About Lease Dispositions
05/05/12 Expiration of Debtors' Exclusive Solicitation Period
11/06/13 Deadline for Debtors' Commencement of Avoidance Actions
-----------------------------------------------------------------
[00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS
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DYNEGY BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited. Distribution
to multiple individuals at the same firm is provided at no
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To continue receiving DYNEGY BANKRUPTCY NEWS, please complete the
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Bankruptcy Creditors' Service, Inc.
572 Fernwood Lane
Fairless Hills, PA 19030
Telephone (215) 945-7000
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E-mail: peter@bankrupt.com
We have published similar newsletters tracking billion-dollar
insolvency proceedings since 1990, starting with Federated
Department Stores. Currently, we provide similar coverage about
the restructuring proceedings involving Enron Corp., MF Global
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(Distribution to multiple professionals at the
same firm is provided at no additional cost.)
DYNEGY BANKRUPTCY NEWS is distributed to paying subscribers by
electronic mail. New issues are published on an ad hoc basis as
significant activity occurs (generally every 10 to 20 days) in the
Debtors' cases. The subscription rate is US$45 per issue.
Newsletters are delivered via e-mail; invoices, transmitted
following publication of each newsletter issue, arrive by fax.
Re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited.
Distribution to multiple individuals at the same firm is provided
at no additional charge; folks outside of your firm should set-up
and pay for their own subscriptions. Subscriptions may be
canceled at any time without further obligation.
-----------------------------------------------------------------
[00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS
-----------------------------------------------------------------
Dynegy Holdings, LLC
1000 Louisiana, Suite 5800
Houston, Texas 77002
Tel: 713-507-6400
http://www.dynegy.com/
Dynegy Holdings, LLC and its subsidiaries' primary business is the
production and sale of electric energy, capacity and ancillary
services from a fleet of 10 operating power plants in six states
totaling roughly 9,903 MW of generating capacity. Dynegy Holdings
is a holding company and conducts substantially all of its
business operations through its subsidiaries.
Dynegy Holdings' direct operations consist of only two plants
-- at Dynegy Danskammer and Dynegy Roseton -- which have a
combined generating capacity of 1,693 MW, despite the size of
Dynegy Holdings' footprint and generating capacity across its
subsidiaries' enterprise.
Dynegy Holdings is a direct subsidiary of Dynegy Inc., and is the
direct or indirect parent of Dynegy Roseton, L.L.C., Dynegy
Danskammer, L.L.C., Hudson Power, L.L.C., and Dynegy Northeast
Generation, Inc.
The business operations of Dynegy Northeast Generation and Hudson
Power are wholly conducted through Dynegy Roseton and Dynegy
Danskammer at their power generation facilities in New York.
The DH Companies employ 152 full-time employees, of whom 126 are
represented by Local Union 320 of the International Brotherhood of
Electrical Workers, AFL-CIO. The remaining employees are not
represented by a union and are predominantly administrative and
managerial employees. All of these employees are employed in
connection with the operation of the Danskammer and Roseton power
generation facilities, and all but one are employees of Dynegy
Northeast.
Prepetition Indebtedness
As of Nov. 7, Dynegy Holdings is a wholly-owned subsidiary of
Dynegy Inc., with Dynegy Inc. holding 100% of the membership
interests in Dynegy Holdings. The remaining Debtors are wholly-
owned direct or indirect subsidiaries of Dynegy Holdings.
Dynegy Holdings, as of Nov. 7, has roughly $3.570 billion in
outstanding unsecured indebtedness arising under seven different
series of notes, debentures, and subordinated capital income
securities, with varying maturities.
A. Senior Unsecured Notes/Debentures
Dynegy Holdings has, from time to time, issued various series of
senior unsecured notes under the Indenture dated September 26,
1996, as amended and restated as of March 23, 1998, as amended and
restated as of March 14, 2001, and under the First through Sixth
Supplemental Indentures, between Dynegy Holdings and Wilmington
Trust Company (as successor to JP Morgan Chase Bank, N.A.,
successor to Bank One Trust Company, National Association).
These series of notes issued under the Indenture are outstanding:
-- 8.75% senior unsecured notes in the outstanding aggregate
principal amount of $88.5 million, due February 15, 2012;
-- 7.5% senior unsecured notes in the outstanding aggregate
principal amount of $785 million, due June 1, 2015;
-- 8.375% senior unsecured notes in the outstanding aggregate
principal amount of $1.046 billion, due May 1, 2016;
-- 7.75% senior unsecured notes in the outstanding aggregate
principal amount of $1.1 billion, due June 1, 2019;
-- 7.125% senior debentures in the outstanding aggregate
principal amount of $175 million due May 15, 2018; and
-- 7.625% senior debentures in the outstanding aggregate
principal amount of $175 million due October 15, 2026.
B. Subordinated Debentures
In May 1997, NGC Corporation Capital Trust I issued Series A
8.316% Subordinated Capital Income Securities through a Rule 144A
offering to qualified institutional buyers. In September 1997,
Series B 8.316% SKIS were exchanged for the outstanding Series A
8.316% SKIS. The Series B 8.316% SKIS in the aggregate principal
amount of $200 million due June 1, 2027 remain outstanding, and
are an unsecured obligation of Dynegy Holdings. The SKIS rank
subordinate and junior in right of payment to all senior
indebtedness of Dynegy Holdings.
C. Bilateral Contingent LC Facility
On May 21, 2010, Dynegy Holdings executed a $150 million unsecured
bilateral contingent letter of credit facility with Morgan Stanley
Capital Group Inc. Availability under the facility is tied to
increases in spark spreads and power prices for 2012 positions.
The facility matures on December 31, 2012. A facility fee accrues
on the unutilized portion of the facility at an annual rate of
0.6% and letters of credit availability accrue fees at an annual
rate of 7.25%.
There are currently no amounts outstanding under the facility.
(ii) $1.25 Billion Intercompany Promissory Note
On September 1, 2011, Dynegy Holdings issued a $1.25 billion
promissory note to its non-debtor subsidiary, Dynegy Gas
Investments, LLC, in exchange for DGIN transferring to Dynegy
Holdings its rights in an undertaking in the same amount. The
Promissory Note bears annual interest at a rate of 4.24%, payable
upon the maturity date, September 1, 2027.
(iii) Cash Collateralized Letter of Credit Facility
On August 5, 2011, Dynegy Holdings and Credit Suisse AG, Cayman
Islands Branch, entered into a Letter of Credit Reimbursement and
Collateral Agreement for a $26,217,318 cash collateralized Letter
of Credit Facility under which Credit Suisse Cayman would maintain
five then-existing letters of credit, one of which expired on
October 28, 2011. The letters of credit under the LC Facility are
issued (i) to various New York state regulatory agencies for
certain environmental liabilities related to Dynegy Danskammer and
(ii) to backstop certain obligations under the Debtors' workers
compensation insurance programs, as well as various surety bonds
posted in connection with litigation matters. The LC Facility is
collateralized by an account maintained by Bank of New York Mellon
holding the sum of $27,003,837, which amount may be withdrawn only
in accordance with the LC Agreement.
(iv) Credit Agreement
On April 2, 2007, Dynegy Holdings, Dynegy Inc. as guarantor, and
certain of their direct and indirect subsidiaries entered into a
Fifth Amended and Restated Credit Agreement. Under the Credit
Agreement, Dynegy Holdings had access to a $1.15 billion revolving
credit facility, an $850 million term letter of credit facility,
and a $70 million senior secured term loan facility. The
obligations under the Credit Agreement were secured by
substantially all of the assets of Dynegy Holdings. The
obligations under the Credit Agreement were guaranteed by Dynegy
Inc. and by certain of their direct and indirect subsidiaries, and
secured by substantially all of the assets of the guarantors.
Dynegy Holdings repaid all obligations under the Credit Agreement
in August 2011.
(v) Danskammer and Roseton Leases
In May 2001, in connection with the acquisition of the Roseton and
Danskammer power generation facilities, Dynegy Danskammer and
Dynegy Roseton each entered into a sale-leaseback transaction
pertaining to, Danskammer power-generating Units 3 and 4 and
Roseton power-generating Units 1 and 2.
Owner Lessors purchased the Danskammer Facility and the Roseton
Facility, and in each case an interest in the related common
facilities. The Owner Lessors are subsidiaries of Resource
Capital Management Corporation, an unrelated third party investor
and a wholly-owned subsidiary of PSEG Resources Inc.
The purchase price with respect to the Danskammer Leased Facility
was approximately $300 million. The purchase price with respect
to the Roseton Leased Facility was approximately $620 million. To
fund their purchases of the Leased Facilities, the Owner Lessors
used $138 million in equity funding from certain of the other PSEG
Entities, and financed the remaining $800 million of the purchase
price and the related transaction expenses through a private
offering of pass-through trust certificates, which were sold to
qualified institutional buyers.
Each of the Owner Lessors simultaneously leased its Leased
Facility to Dynegy Danskammer and Dynegy Roseton pursuant to a
facility lease. The Danskammer Lease expires May 8, 2031 and the
Roseton Lease expires on February 8, 2035.
The Lessees must make periodic rent payments on May 8 and November
8 of each year, Dynegy Danskammer through 2030 and Dynegy Roseton
through 2034. Any payments by the Lessees or the Guarantor are
applied pro rata to the Facility Leases, and neither Facility
Lease may be preferred over the other. The next three rent
payments due for each Leased Facility, as well as the total rent
payments remaining until the end of the Lease terms, are:
11/08/11
through end
Facility 11/08/11 05/08/12 11/08/12 of term
-------- -------- -------- -------- -----------
Danskammer $3,888,713 $3,888,713 $78,574,842 $102,991,141
Roseton $78,594,126 $51,629,366 $44,623,745 $691,030,741
----------- ----------- ----------- ------------
Total $82,482,840 $55,518,080 $123,198,587 $794,021,882
Under the sale-leaseback arrangements, the rent payments paid by
the Lessees are assigned to the Indenture Trustee for the
respective Facility. The Indenture Trustee then pays a portion of
that payment to each of two pass-through trusts, the Series A
Pass-Through Trust and the Series B Pass Through Trust. The Pass-
Through Trusts pay these amounts to the Pass-Through Certificate
Holders. Amounts paid in excess of the amounts due to the Pass-
Through Certificate Holders are paid by the Indenture Trustee to
the Owner Lessor Entity for the respective Leased Facility.
The Series A Trust certificates, representing a total obligation
of $250 million, bore interest at 7.27%, and had a final
distribution on November 8, 2010 and have been defeased. The
Series B Trust certificates, representing a total obligation of
$550.4 million, bear interest at 7.67%, and have a final
distribution on November 8, 2016. The current total outstanding
principal of the Series B Trust certificates as of Nov. 7 is
$550.4 million.
ROAD TO BANKRUPTCY
Dynegy Holdings has faced a number of issues, including (i)
decreasing liquidity due to declining revenues resulting from
sustained low power prices over the past two years, (ii) an over-
leveraged balance sheet, and (iii) economically unfavorable leases
for the Leased Facilities.
According to Kent R. Stephenson, executive vice president of DHI,
sustained low power prices over the past two years have had a
significant adverse impact on the Companies' business and continue
to negatively impact their projected future liquidity.
Specifically, Dynegy Holdings' annual consolidated revenue peaked
in the year ending December 31, 2008 (FY08) at $3.324 billion, and
has since declined to $2.468 billion in FY09 and $2.323 billion in
FY10. As further illustration of the steep decline in revenue,
for the six-month period ending June 30, 2010, Dynegy Holdings
reported consolidated revenues of $1.097 billion, and for the six-
month period ending June 30, 2011, Dynegy Holdings reported
consolidated revenues of $831 million.
In August 2010, Dynegy Inc. struck a deal to be acquired by an
affiliate of The Blackstone Group at $4.50 a share or roughly $4.7
billion. That offer was raised to $5.00 a share in November.
Through Carl Icahn and investment fund Seneca's efforts,
shareholders thumbed down both offers.
In December 2010, an affiliate of Icahn commenced a tender offer
to purchase all of the outstanding shares of Dynegy common stock
for $5.50 per share in cash, or roughly $665 million in the
aggregate. In February 2011, Icahn Enterprises L.P. terminated
the proposed merger agreement with the Company after it failed to
garner the required number of shareholder votes. The Companies
also eliminated approximately 135 positions across all functional
and geographic areas, resulting in an expected annual savings of
approximately $50 million, Mr. Stephenson related.
Goldman, Sachs & Co. and Greenhill & Co., LLC, served as financial
advisors and Sullivan & Cromwell LLP served as legal counsel to
Dynegy on the sale efforts. Houlihan Lokey, according to a report
by the Journal, is advising Dynegy creditors.
In the past months, a finance and restructuring committee was
created to undertake a comprehensive review of Dynegy's various
restructuring alternatives, including, without limitation, if
appropriate, reviewing and evaluating (i) possible changes to the
capital structure of Dynegy, including the issuance, repurchase or
prepayment of indebtedness or equity securities and (ii) possible
sales of Dynegy's assets.
The committee is chaired by Vincent J. Intrieri. Other directors
on the committee are Thomas W. Elward, E. Hunter Harrison and
Samuel Merksamer.
August 2011 Reorganization
On August 4, 2011, Dynegy Inc., Dynegy Holdings, and certain of
their direct and indirect subsidiaries underwent a reorganization
and restructuring to, among other things, facilitate certain
credit facilities and maximize their flexibility to address
leverage and liquidity issues and to preserve the value of their
assets.
As part of the reorganization, Dynegy Holdings and its
subsidiaries effected transactions to cause:
-- substantially all of the coal-fired power generation
facilities to be held by Dynegy Midwest Generation, LLC, an
indirect subsidiary of Dynegy Holdings;
-- substantially all of the gas-fired power generation
facilities to be held by Dynegy Power, LLC, an indirect
subsidiary of Dynegy Holdings; and
-- 100% of the ownership interests of Dynegy Northeast
Generation, the entity that indirectly holds the equity
interest in the subsidiaries that operate the Roseton and
Danskammer power generation facilities, to be held directly
by DHI.
As a result of the reorganization, GasCo owns a portfolio of eight
primarily natural gas-fired intermediate (combined cycle) and
peaking (combustion and steam turbines) power generation
facilities diversified across the West, Midwest and Northeast
regions of the United States, totaling 6,771 MW of generating
capacity. CoalCo owns a portfolio of six primarily coal-fired
baseload power generation facilities located in the Midwest,
totaling 3,132 MW of generating capacity.
GasCo and CoalCo are indirect wholly owned subsidiaries of DHI and
were designed to be separately financeable. The Company said
GasCo and CoalCo are bankruptcy remote in order to accommodate the
financings reflected by the credit facilities and to provide the
Company with greater flexibility in its efforts to address
leverage and liquidity issues and to realize value of its assets.
On September 1, 2011, Dynegy Inc. and DGIN, a direct wholly-owned
subsidiary of Dynegy Holdings, entered into a Membership Interest
Purchase Agreement whereby DGIN sold 100% of the outstanding
membership interests of Dynegy Coal HoldCo, LLC, a Delaware
limited liability company and wholly-owned subsidiary of DGIN, to
Dynegy Inc. Coal HoldCo indirectly owns CoalCo.
In exchange for DGIN's membership interests in Coal HoldCo, Dynegy
Inc. issued an undertaking to DGIN pursuant to which Dynegy Inc.
agreed to make certain specified payments over time which coincide
in timing and amount to the payments of principal and interest
that Dynegy Holdings is obligated to make under a portion of its
Old Notes.
DGIN assigned its right to receive payments under the Undertaking
Agreement to Dynegy Holdings in exchange for a promissory note in
the amount of $1.25 billion that matures in 2027. The Note bears
annual interest at a rate of 4.24%, which will be payable upon
maturity. As a condition to Dynegy Inc.'s consent to the
assignment of the Undertaking Agreement, the agreement was amended
and restated to be between Dynegy Holdings and Dynegy Inc. and to
provide for the reduction of Dynegy Inc.'s obligations if the
outstanding principal amount of any of Dynegy Holdings' $3.5
billion of outstanding notes and debentures is decreased as a
result of any exchange offer, tender offer or other purchase or
repayment by Dynegy Inc. or its subsidiaries.
Mr. Stephenson said that by undertaking the corporate and
financial restructuring steps in 2011, Dynegy Holdings and its
affiliated entities were able to avoid defaults under their then-
current financing arrangements, obtain additional liquidity and
flexibility and refinance the obligations outstanding under the
Credit Agreement.
Exchange Offer
In September, Dynegy Inc. offered to pay a combination of cash and
its own new 10% Senior Secured Notes due 2018 in exchange for the
tender of up to $1.25 billion of Old Notes. Total consideration
would range from $400 to $720 per $1,000 principal amount of Old
Notes, and the exact combination of cash and New
Notes would vary, depending on the series of Old Notes being
exchanged and the date of tender. The Exchange Offer, after being
extended several times, was terminated on November 3, 2011.
Holders of an insufficient amount of Old Notes tendered their
notes, and the exchange offer was not consummated.
In light of the failed Exchange Offer, Dynegy Holdings is facing a
liquidity crisis with approximately $43.8 million of unpaid
interest payments due and approximately $278.1 million of interest
payments coming due in the next twelve months. In addition,
approximately $82.48 million in payments are coming due under the
Danskammer and Roseton Facility Leases on November 8, 2011.
To address the issue of Dynegy Holdings' over-leveraged balance
sheet, the Debtors engaged in discussions with holders of its
public bond debt. After extensive negotiations, Dynegy Holdings
was able to reach an agreement with holders of approximately $1.4
billion of Dynegy Holdings' outstanding public bond debt on the
principal terms of a restructuring effectuated through a Chapter
11 plan of reorganization.
As early as March, Dynegy warned shareholders it might be forced
into bankruptcy if it is unable to renegotiate the terms of its
existing debt.
An Unusual Bankruptcy
DHI and four subsidiaries delivered separate voluntary petitions
for bankruptcy under Chapter 11 of the Bankruptcy Code on Nov. 7,
2011, to the U.S. Bankruptcy Court for the Southern District of
New York.
Mike Spector of The Wall Street Journal called DHI's bankruptcy
"unusual" in a way that could cause losses for bondholders without
harming parent-company shareholders that include Carl Icahn and
hedge fund Seneca Capital.
Dynegy's plan to eliminate billions of dollars owed to bondholders
while sparing parent company shareholders flips usual bankruptcy
rules on their head, Mr. Spector pointed out. Creditors are
usually paid first during bankruptcy proceedings and shareholders
often are left with nothing, he noted.
But Dynegy has reorganized its corporate structure in a way that
protects shareholders from a bankruptcy filing, he added.
The Journal noted that the August restructuring left the holding
company without a claim on the coal-powered plants and just
holding Dynegy's bond debt.
The Journal reported on July 29 that Dynegy's restructuring
proposal was pushed by Mr. Icahn. The planned reorganization
would give Dynegy a better chance "to obtain prospective financing
and investment," a Dynegy official told the Journal at that time
in an e-mail.
The Journal noted in that July report that while shareholders of
strong companies, like Liberty Media Corp., have used weak
covenants to sell assets out from under bondholders, no one has
tried the same tactic with a company as distressed as Dynegy for
fear of inviting fraud litigation if it goes bankrupt.
"If you buy bonds without protection, sooner or later the piper
has to get paid," the Journal said, citing Chris Taylor an energy
strategist at FBR Capital.
As an architect of the leveraged-buyout craze in the 1980s, and as
an activist shareholder in more recent decades, Mr. Icahn has
shown himself uniquely willing to play the bond markets in
aggressive ways, the Journal noted. In 2009, for instance, he
played bondholders of CIT Group against each other in an effort to
force a liquidation, even as the $71 billion lender with 5,000
employees struggled to save itself, the report noted.
Mr. Icahn is seeking to salvage his investment in Dynegy after he
blocked a $4.50-per-share buyout bid by Blackstone Group last
year, then had his own $5.50 a share offer rejected.
In July, certain holders of obligations with potential recourse
rights to DHI initiated legal proceedings seeking to enjoin the
parent's restructuring efforts. Plaintiffs in that lawsuit seek
to enjoin the proposed reorganization based on purported breaches
of guarantees issued by DHI in connection with two sale lease back
transactions in which DHI's subsidiaries, Dynegy Roseton, L.L.C.
and Dynegy Danskammer, L.L.C., leased certain power-generating
facilities located in Newburgh, New York.
Restructuring Support Agreement
Mr. Stephenson related that the Debtors filed the Chapter 11 Cases
to implement the Restructuring Support Agreement and the Term
Sheet and address the burdensome lease obligations at Danskammer
and Roseton. He said the RSA, together with the Term Sheet, lays
a solid foundation for a consensual plan of reorganization to be
filed by the Debtors in the Chapter 11 Cases and should
significantly facilitate the proceedings and the Debtors'
objective of preserving and enhancing value for the benefit of
their stakeholders.
The pre-arranged plan calls for, among other things, the exchange
of all unsecured obligations of Dynegy Holdings, including all of
the Old Notes (except for the SKIS), for (a) a $400 million cash
payment; (b) $1 billion aggregate principal amount of senior
secured notes to be issued by Dynegy Inc. or an additional cash
payment of $1 billion, if Dynegy Inc. determines it can obtain the
financing elsewhere on more favorable terms; and (c) $2.1 billion
of convertible PIK notes to be issued by Dynegy Inc.
The RSA contemplates these milestones:
December 7, 2011 Negotiation of definitive documents
March 15, 2012 Approval of Disclosure Statement
explaining a Chapter 11 Plan
June 15, 2012 Confirmation of a Chapter 11 Plan
August 1, 2012 Plan effective date
The parties may terminate the agreement if the definitive
documents are not agreed to or if certain milestones to
consummation are not achieved, Mr. Stephenson said.
A full-text copy of the RSA, dated Nov. 7, 2011, is available for
free at http://bankrupt.com/misc/dynegyrsa.pdf
The bondholders that consented to the restructuring are:
* AEGON USA Investment Management LLC
230 West Monroe, Suite 1450
Chicago, IL 60606
Fax: 800-454-2664
Attn: Jim Schaeffer
E-mail: jschaeffer@aegonusa.com
* Avenue Investments L.P.
Avenue Special Situations Fund VI (Master), LP
Avenue International Master LP
Avenue CDP-Global Opportunities Fund L.P.
c/o Avenue Capital Group
399 Park Avenue, 6th Floor
New York, NY 10022
Fax: 212-850-7506
Attn: Stephen Burnazian
Matthew Kimble
E-mail: sburnazian@avenuecapital.com
mkimble@avenuecapital.com
* Marjner LDC
* Caspian Capital Partners L.P.
Caspian Select Credit Master Fund, Ltd.
Caspian Alpha Long Credit Fund, L.P.
Caspian Solitude Master Fund, L.P.
c/o Caspian Capital L.P.
767 Fifth Avenue, 45th Floor
New York, NY 10153
Fax: 212-826-6980
Attn: Adam S. Cohen
Greg Saiontz
E-mail: adam@caspianlp.com
greg@caspianlp.com
* Franklin Advisers Inc.
One Franklin Templeton Investments
Fax: 916-463-1902
Attn: Ed Perks
E-mail: perksed@frk.com
* Venor Capital Master Fund Ltd.
Times Square Tower
7 Times Square, Suite 3505
New York, NY 10036
Fax: 212-703-2111
Attn: Harlan Cherniak
Michael J. Wartell
John Roth
E-mail: hcherniak@venorcapital.com
mwartell@venorcapital.com
jroth@venorcapital.com
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[00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING
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* DYNEGY INC. ANNOUNCES RESTRUCTURING AGREEMENT WITH HOLDERS
OF OVER $1.4 BILLION OF DYNEGY HOLDINGS, LLC SENIOR NOTES
* Dynegy Holdings LLC and Four Subsidiaries File for Relief
under Chapter 11
* Business continues as usual for Dynegy and All of its
Other Subsidiaries
HOUSTON, Texas -- Nov. 7, 2011 -- Dynegy Inc. (Dynegy)
(NYSE:DYN) announced that it has reached an agreement with a group
of investors holding over $1.4 billion of senior notes issued by
Dynegy's direct wholly-owned subsidiary, Dynegy Holdings, LLC
(DH), regarding a framework for the consensual restructuring of
over $4.0 billion of obligations owed by DH. If this
restructuring support agreement is successfully implemented, it
will significantly reduce the amount of debt on the Company's
consolidated balance sheet. DH and four of its wholly owned
subsidiaries -- Dynegy Northeast Generation, Inc., Hudson Power,
L.L.C., Dynegy Danskammer, L.L.C. (Danskammer) and Dynegy Roseton,
L.L.C. (Roseton) (collectively, the Debtor Entities) --filed
voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York, Poughkeepsie Division in order to
implement the agreement and to address the burdensome lease
obligations at Roseton and Danskammer.
Dynegy and all of its subsidiaries -- other than the Debtor
Entities -- including those that own and operate the Company's
coal-fired and gas-fired businesses that were separately financed
earlier this year and those that provide ancillary services have
not filed for Chapter 11. All such entities continue to operate
their businesses in the ordinary course without any impact from
the limited Chapter 11 filings of DH and its subsidiaries that are
involved with the Roseton and Danskammer facilities.
Robert C. Flexon, President and Chief Executive Officer of
both Dynegy and DH, said, "This marks an important next step in
the Company's ongoing effort to restructure its consolidated
balance sheet and to position its assets in a fashion that will
maximize our operational flexibility. We look forward to working
with our stakeholders to complete and implement this restructuring
support agreement as quickly and efficiently as possible."
Under the restructuring support agreement entered into
between Dynegy, DH and holders of over $1.4 billion of DH's senior
notes, all unsecured obligations of DH, including $3.4 billion of
senior notes, $200 million of subordinated notes, approximately
$130 million of accrued interest, and the payments associated with
the Roseton and Danskammer leases, will be exchanged for:
-- a $400 million cash payment;
-- $1.0 billion of new 7-year 11% secured notes to be issued
by Dynegy and secured by the equity in the Company's
separate coal and gas-fueled generating businesses (or an
additional cash payment of $1.0 billion, if the Company
determines it can obtain the financing elsewhere on more
favorable terms); and
-- $2.1 billion of Dynegy's new convertible PIK notes
maturing on December 31, 2015. Dynegy will have the
right to redeem the notes at varying discounts through
the end of 2013, and can make open market purchases of
the notes with excess cash from operations. At maturity,
the notes would mandatorily convert into 97% of the
common equity of Dynegy to the extent not previously
redeemed or retired. The equity in the Company's
separate coal and gas-fueled generating businesses will
remain direct or indirect subsidiaries of Dynegy.
The holders of DH's Series B 8.316% Subordinated Capital
Income Securities due 2027 would participate in the restructuring
as an unsecured note holder, but their recovery would be subject
to enforcement of their contractual subordination to the senior
unsecured notes. Alternatively, the subordinated note holders
will be offered the opportunity to participate, without
subordination, in the restructuring as an unsecured note holder at
$0.25 for every dollar of claims.
The restructuring support agreement contemplates the
negotiation of definitive documents by December 7, 2011, and that
the transaction will be implemented pursuant to a Chapter 11 plan
for DH that must become effective by August 1, 2012. Interest will
accrue under the new 11% secured notes and the new convertible PIK
notes from the Chapter 11 petition date through the effective
date. The parties may terminate the restructuring support
agreement if the definitive documents are not agreed-to or if
certain other milestones to consummation are not achieved.
The Debtor Entities' only operations consist of those at the
Roseton and Danskammer facilities, which are the subject of leases
that the Debtor Entities are seeking to immediately reject
pursuant to a motion filed in the Bankruptcy Court. The agreement
is also conditioned on the claims against DH arising from the
Roseton and Danskammer leases being fixed by the Bankruptcy Court
at an amount not to exceed $300 million. The Debtor Entities are
prepared to surrender the Roseton and Danskammer facilities upon
entry of an order authorizing the rejection of the leases.
However, applicable federal and state regulatory requirements may
prevent the Debtors from doing so immediately. Therefore, the
Debtor Entities intend to operate the facilities in accordance
with prudent operating standards and to the extent necessary to
comply with applicable federal and state regulatory requirements
until the owners of the leased facilities, which are affiliates of
Public Service Enterprise Group, Inc., are authorized to take
operational control.
The Debtor Entities have also sought customary first-day
relief designed to ensure their smooth transition into Chapter 11
administration. Among other things, this relief, if granted by
the Bankruptcy Court, will ensure that the Debtor Entities have
sufficient cash and liquidity to fund their continuing operations
and all administrative obligations incurred during the Chapter 11
process.
The Company expects to file an 8-K with the SEC prior to
market open on Tuesday, November 8, 2011. This filing will
include the restructuring support agreement and the associated
term sheet.
The Debtor Entities are represented in the Chapter 11
proceedings by Sidley Austin LLP as their reorganization counsel.
Dynegy and its other subsidiaries are represented by White & Case
LLP, who is also special counsel to the Debtor Entities with
respect to the Roseton and Danskammer lease rejection issues.
Dynegy was advised by Lazard Freres & Co. LLC and the Debtor
Entities' financial advisor is FTI Consulting.
ABOUT DYNEGY
Dynegy's subsidiaries produce and sell electric energy,
capacity and ancillary services in key U.S. markets. The Dynegy
Power, LLC power generation portfolio consists of approximately
6,771 megawatts of primarily natural gas-fired intermediate and
peaking power generation facilities. The Dynegy Midwest
Generation, LLC portfolio consists of approximately 3,132
megawatts of primarily coal-fired baseload power plants. The DNE
portfolio consists of approximately 1,693 megawatts from two power
plants which are primarily natural gas-fired peaking and baseload
coal generation facilities.
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[00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011
-----------------------------------------------------------------
Dynegy Inc.
(Unaudited) Condensed Consolidated Balance Sheets
(In millions)
As of June 30, 2011
ASSETS
Current Assets
Cash and cash equivalents $399
Restricted cash and investments 878
Short-term investments 106
Accounts receivable, net 169
Accounts receivable, affiliates -
Inventory 125
Assets from risk-management activities 989
Deferred income taxes 12
Broker margin account 202
Prepayments and other current assets 137
--------
Total Current Assets 3,017
Property, Plant and Equipment 8,700
Accumulated depreciation (2,499)
--------
Property, Plant and Equipment, net 6,201
Other Assets
Restricted cash and investments 9
Assets from risk-management activities 84
Intangible assets 116
Other long-term assets 436
--------
Total Assets $9,863
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $111
Accrued interest 51
Accrued liabilities and other current liabilities 86
Liabilities from risk-management activities 1,043
Notes payable and current portion of long-term debt 1,008
--------
Total Current Liabilities 2,299
Long-term debt 3,852
Long-term debt, affiliates 200
--------
Long-term Debt 4,052
Other Liabilities
Liabilities from risk-management activities 123
Deferred income taxes 509
Other long-term liabilities 321
--------
Total Liabilities 7,304
Commitments and Contingencies
Stockholders' Equity
Common stock 1
Additional paid-in capital 6,071
Subscriptions receivable (2)
Accumulated other comprehensive loss (51)
Accumulated deficit (3,389)
Treasury stock (71)
--------
Total Stockholders' Equity 2,559
--------
Total Liabilities and Stockholders' Equity $9,863
========
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[00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE
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Debtor: Dynegy Holdings, LLC
1000 Louisiana, Suite 5800
Houston, Texas 77002
Tel: 713-507-6400
http://www.dynegy.com/
Bankruptcy Case No.: 11-38111
Debtor-affiliates that filed separate Chapter 11 petitions:
Debtor Case No.
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Dynegy Roseton, L.L.C. 11-38107
Dynegy Danskammer, L.L.C. 11-38108
Hudson Power, L.L.C. 11-38109
Dynegy Northeast Generation, Inc. 11-38110
Chapter 11 Petition Date: Nov. 7, 2011
Bankruptcy Court: U.S. Bankruptcy Court
Southern District of New York
Debtors'
Counsel: Matthew A. Clemente, Esq.
Paul S. Caruso, Esq.
Brian J. Lohan, Esq.
SIDLEY AUSTIN LLP
One South Dearborn Street
Chicago, IL 60603
Tel: (312) 853-7000
Fax: (312) 853-7036
E-mail: mclemente@sidley.com
pcaruso@sidley.com
blohan@sidley.com
Debtors'
Special
Litigation
Counsel: WHITE & CASE LLP
Debtors'
Financial
Advisor: FTI CONSULTING
Debtors'
Claims and
Noticing
Agent: EPIQ BANKRUPTCY SOLUTIONS
Dynegy Inc.'s
Counsel: Thomas E. Lauria, Esq.
WHITE & CASE LLP
Southeast Financial Center
200 South Biscayne Boulevard
Miami, FL 33131
Fax: (305) 358-5744
E-mail: tlauria@whitecase.com
Counsel to
Noteholders
that signed
the RSA: Andrew N. Rosenberg, Esq.
Alice Belisle Eaton, Esq.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, NY 10019
E-mail: arosenberg@paulweiss.com
aeaton@paulweiss.com
Total Assets: $13.765 billion as of Sept. 30, 2011
Total Debts: $6.181 billion as of Sept. 30, 2011
The Debtor did not file a list of its largest unsecured creditors
together with its petition.
The petition was signed by Catherine B. Callaway, executive vice
president and general counsel.
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[00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES
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Dynegy Holdings, LLC, and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Southern District of New York to enter an
order directing the joint administration of their Chapter 11 cases
for procedural purposes.
Joint administration of the bankruptcy cases is warranted, Sophia
P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts.
Joint administration, she says, will avoid the preparation,
replication, service, and filing, as applicable, of duplicative
notices, applications, and orders, thereby saving the Debtors
considerable expenses and resources.
Ms. Mullen assures the Court that the relief requested will not
adversely affect creditors' rights, as the Motion requests only
the administrative, not the substantive, consolidation of the
estates. In fact, she points out, the reduced costs that will
result from the joint administration of these cases will inure to
the benefit of all creditors. She adds that the relief requested
will relieve the Court of the burden of entering duplicative
orders and maintaining duplicative files, as well as simplify
supervision of the administrative aspects of the Chapter 11 cases
by the Office of the United States Trustee.
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[00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES
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The Debtors ask the Court to extend the time within which they may
file their schedules of assets and liabilities, schedules of
current income and expenditures, schedules of executory contracts
and unexpired leases, and statements of financial affairs.
Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of
the Federal Rules of Bankruptcy Procedure, the Debtors are
required to file, within 14 days after the Petition Date, their
(i) schedules of assets and liabilities, (ii) schedules of
executory contracts and unexpired leases, (iii) schedules of
current income and expenditures, and (iv) statements of financial
affairs.
The Debtors ask that the 14-day period be extended by an
additional 31 days, or until Dec. 22, to give the Debtors a total
of 45 days from the Petition Date to file their Schedules and
Statements.
Sophia P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts
that cause exists to extend the deadline for the filing of the
Schedules and Statements, based on the size and complexity of the
Debtors' businesses, the number of the Debtors and the number of
potential creditors of the Debtors, and the numerous burdens
imposed by the Debtors' reorganization efforts, particularly in
the early days of the Chapter 11 cases. The Debtors' management
and employees, together with their outside legal and financial
advisors, have been working diligently to compile the information
necessary for the Schedules and Statements, Ms. Mullen tells the
Court. The magnitude of that task, when taken together with the
considerable effort involved in preparing for the filing of the
Chapter 11 cases, the anticipated burdens of preparing the
Debtors' transition into Chapter 11, and the ongoing burdens of
operating the Debtors' businesses day-to-day, supports an
extension of the deadline set forth in the Bankruptcy Rules for
filing the Schedules and Statements, she maintains.
*** End of Issue No. 1 ***
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