Who Gave Permission To A Bankrupt MF Global To Sell Italian Bonds To JPM At A 5% Discount To Market Value?

Tyler Durden's picture

We already knew previously that shortly after it filed for bankruptcy, George Soros bought $2 billion in Italian bonds from the bankrupt MF Global. One thing we did not know was the terms of the purchase. Today, the WSJ has disclosed another facet of the bankruptcy which like Lehman will expose gigabytes of dirt on the corrupt US financial system. Namely, that after liquidating, MF sold Italian bonds - the culprit that ultimately led to the bank's bankruptcy - to none other than JP Morgan and "one large hedge fund."So far so good. Where it gets disturbing is that as the WSJ discloses, "buyers paid about 89 cents on the dollar for the Italian bonds, compared with a market price of about 94 cents at the time, according to the trader who bought them...Today, those bonds trade at more than 96 cents, according to Tradeweb." Our question is first, why did the bankrupt MF Global estate proceed to unload post-filing assets and under whose discretion: after all the company had entered bankruptcy, and it is up to the estate, which includes bondholders and other stakeholders to determine what assets and under what conditions, can be liquidated. Did MF Global believe that the same exemption from the law that it apparently thought was applicable to its pre-petition, was also valid under bankruptcy? Because if the firm did not get prior-permission form a bankruptcy judge to liquidate these assets, this is an act far worse than commingling and even the firesale of Lehman's US Brokerage to Barclays for pennies on the dollar - this is flaunting bankruptcy law front and center.

Secondly, and perhaps just as important, who on the estate agreed to give JPM a 5% explicit discount to what the article notes was a fair price that is 5% higher and which by definition would have had bidders at that price. We hope someone in the Senate will take a quick look at this note, and the related WSJ article, and ask Messrs Corzine et al to provide some much needed clarity on this topic.