Bank of America Corp. can trade claims on bankrupt MF Global Holdings Ltd. after setting up so-called screening walls to ensure that knowledge it gains from being a member of the creditors committee doesn't reach its traders, a judge said in a court order.
Bank of America asked U.S. Bankruptcy Judge Martin Glenn last month to let it trade the defunct company's claims, including 6.25 percent bonds and bank loans, saying it might forfeit a "beneficial investment opportunity" for itself or its money management clients if the firm is barred from buying and selling during the bankruptcy. The bank undertook to maintain "ethical walls" preventing its traders from using confidential information gained from its membership on the committee. Glenn gave his approval in an order issued today.
Such requests are common among banks and hedge funds that have loans and investments in bankrupt companies along with separate trading desks. Elliott Management Corp., another MF Global committee member, also sought permission to trade the company's claims, as it did in the Lehman Brothers Holdings Inc. case, where it's also is a member of the creditors' committee.
MF Global's $325 million of 6.25 percent notes traded at 33 cents on the dollar on Dec. 19, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The debt, issued at par in August, has declined from 50 cents on the dollar since the company's Oct. 31 bankruptcy filing. The bonds have declined from 35 cents at the end of November.
The parent's bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).