Vol 16 (2019) - Issue 2

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MF Global CVA Derailed by Court Order: Heis & Others v Financial Services Compensation Scheme Limited and Another [2018] EWCA Civ 1327

Synopsis

The Administrators of MF Global asked the English court whether they were able to implement an innovative CVA proposal. The Court of Appeal, hearing the case on a highly expedited basis, directed that the CVA should not be implemented because of a significant 'woodwork claim'. This claim emerged after the CVA had been approved by creditors, but before a final claims date, and rendered the economics of the CVA substantially different to the bargain that creditors had originally agreed.

Administrators propose CVA

MF Global UK Limited ('MF Global') was a major brokerage firm, which has been in special administration since 2011 and has circa 3,000 creditors. By August 2016, the joint special administrators of MF Global (the 'Administrators') had made significant distributions to creditors of up to 90p in the £. The remaining material assets and liabilities of MF Global related to German tax issues arising from cum/ex trading, involving claims by the German Tax Authority (the 'GTA') against MF Global, and by MF Global against the GTA. These were likely to take a long time to resolve, meaning that further distributions (or a winding up) would be some time away.