Forward Motions: MF Global Seeks to Begin Creditor Payouts

Next week in bankruptcy, MF Global Inc. will ask a bankruptcy judge to authorize a $295 million payout to its creditors.

On Monday, Judge Martin Glenn of the U.S. Bankruptcy Court in Manhattan will hear the request.

Creditors have waited nearly three years as all but a few individual brokerage and commodity customers received 100% of payments owed.

The bulk of the money is earmarked for unsecured creditors, who would receive a first distribution of about 20% of what trustee James W. Giddens has agreed to pay.  Holders of secured, administrative and priority claims that have been resolved will get 100% of their money all at once.

Mr. Giddens has also asked for permission to create a reserve fund of more than $400 million for unresolved claims and to put a cap on their amounts.

On Wednesday, Atlantic City, N.J.’s Revel Casino Hotel will head to the auction block after closing its doors early this month after no buyers immediately stepped forward to save the newest addition to the city’s famed boardwalk from its second bankruptcy in as many years.

Revel, a glittering $2.4 billion resort that made its boardwalk debut in 2012, last week announced a deal with Florida real estate developer Glenn Straub. Mr. Straub has offered $90 million in cash, which is subject to rival offers at the auction.

The winning bid is also subject to approval from Judge Gloria Burns at a sale hearing currently scheduled for Sept. 30.

Rival bidders could include Richard Meruelo, whose family invests in real estate and last year made a failed attempt to buy the Trump Plaza casino in Atlantic City. Mr. Meruelo expressed his desire to bid on Revel in bankruptcy court on Monday.

A federal bankruptcy watchdog and various creditors have objected to what they have said is a speedy auction timeline as well as to a $3 million breakup fee for Mr. Straub, should he lose the bidding.

On Tuesday in Worcester, Mass., a judge will decide whether or not to approve professional fees for TelexFree LLC’s bankruptcy advisers, who have agreed to cut their take by more than $1 million.

To head off objections from the U.S. Securities and Exchange Commission, attorneys at Greenberg Traurig and turnaround advisers at Alvarez & Marsal have agreed to dramatically slash the amount they charged TelexFree in the early days of its Chapter 11 case.

In return for the agreed-to reductions—which together total $1.09 million—TelexFree’s court-appointed trustee and the SEC won’t object as the firms seek bankruptcy-court approval for the fees.

All debtor advisers in Chapter 11 must submit their fees for bankruptcy court approval.  The SEC will also ask a federal district judge to lift an order freezing TelexFree’s assets so the firms can collect their fees.

TelexFree, a Massachusetts company accused by federal prosecutors of operating a vast pyramid scheme, sought Chapter 11 protection in April with the goal of reorganizing, but it and its principals were soon hit with litigation by state and federal securities regulators.

Prosecutors say investors sunk hundreds of millions of dollars in TelexFree, with total losses, including promised returns, exceeding $1 billion. TelexFree and its co-owners, recently indicted on wire fraud charges, dispute assertions that the company operated a pyramid scheme.

In bankruptcy, control of the company has been turned over to an independent trustee.

-Joseph Checkler and Jacqueline Palank contributed to this article.

Write to Tom Corrigan at [email protected]. Follow him on Twitter at @TheTomCorrigan.