MF Global former customer seeks ruling on letter-of-credit liability

By Caroline Salls

Pittsburgh, July 19 - MF Global Inc. former customer Koch Supply & Trading, LP filed a lawsuit Thursday asking the U.S. Bankruptcy Court for the Southern District of New York to rule that it has no liability for a post-filing date expiration of a $20 million letter of credit, according to court documents.

MF Global Inc. SIPA liquidation trustee James W. Giddens was named as the defendant in the lawsuit.

Koch said neither the debtor, which was a beneficiary under the letter of credit, nor the trustee ever drew on the letter of credit and obtained any proceeds from it, and no property changed hands upon the expiration of the letter of credit.

However, Koch said the trustee has alleged that the expiration of the letter of credit was an unauthorized post-filing date transfer of customer property with a value equal to the full $20 million face amount of the letter of credit.

The trustee claims that the alleged transfer of the letter of credit is avoidable.

Giddens has demanded payment on the letter of credit, the complaint said.

MF Global Holdings, a New York-based commodity and derivatives broker, filed for bankruptcy on Oct. 31, 2011, under Chapter 11 case number 11-15059.

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