A series of settlements to benefit victims of Bernard Madoff’s massive Ponzi scheme will go before a bankruptcy judge Wednesday in Manhattan for final approval.
The settlements include a $95 million deal struck with Senator Fund SPC, an investment fund that parked all of its money with Mr. Madoff, and a $497 million deal to collect money from Herald Fund SPC and Primeo Fund.
Irving Picard, the official tasked with paying back Mr. Madoff’s victims, has to date collected or reached deals to collect approximately $10.5 billion of the $17.3 billion in principal that investors lost upon the collapse of the Ponzi scheme. Of the recovered funds, nearly $6 billion has been returned to investors.
The Senator agreement represents 100% of the principal Senator withdrew from Mr. Madoff’s investment firm. Because Senator put in more money than it took out, the fund will receive a $238.75 million claim against Mr. Madoff’s firm. The first $95 million it is in line to receive as a creditor will go toward paying the amount due under the settlement.
Herald Fund, meanwhile, will receive a $1.6 billion claim against Mr. Madoff’s investment firm as part of its deal that will be paid back in the same fashion.
Down the hall in Manhattan’s bankruptcy court on Wednesday, Former MF Global customers, as well as the administrator in charge of the defunct brokerage, will be fighting a bid by Jon S. Corzine and other former MF Global executives to tap $7.5 million of their errors-and-omission insurance policy to cover their legal-defense costs.
In court filings, the former customers and administrator urged a judge not to raise the so-called soft cap on the insurance policies, which Mr. Corzine and the others requested last month, as lawsuits against them are becoming more active.
The soft cap refers to the judge’s power to limit how much of the available insurance money can be tapped by the defendants at one time.
Lawyers for the former customers, who have long fought the use of insurance proceeds, said the money should go to the trustee unwinding MF Global, “not to benefit individuals who caused the harm.”
MF Global ‘s bankruptcy judge has already allowed MF Global—which imploded three years ago after its bets on European sovereign debt came to light—to tap most of the $200 million or so remaining on its directors-and-officers insurance policy. The errors-and-omissions policy is for about $150 million, according to court filings.
In Delaware, a bankruptcy judge will consider Thursday how to divide the money from the sale of Source Home Entertainment’s manufacturing division, which produces 60% of U.S. retailers’ checkout-counter displays.
In an earlier payout plan, Source Home Entertainment said unsecured creditors should expect to be repaid less than 1% of what they are owed by the Florida company, which filed for bankruptcy in June after shutting down its magazine- and book-distribution business—its biggest division—and laying off more than 5,000 employees.
Judge Kevin Gross in U.S. Bankruptcy Court in Wilmington, Del., will look over the fine print of that payout plan before it heads to creditors who have the power to reject it by a vote.
Source Home Entertainment used bankruptcy to find a buyer for its manufacturing plant in Rockford, Ill. The only bid came from the company’s lenders, which promised to forgive $24 million of debt and keep the plant open, according to court documents. At the time of the company’s bankruptcy, the company owed about $51.9 million to those lenders.
The manufacturing division “remained profitable” as its magazine wholesale business faltered, according to court papers.
Prior to the shutdown of the wholesale business, Source Home Entertainment distributed magazines and other printed material to 32,500 locations around the world, including at Barnes & Noble Inc., Wal-Mart Stores Inc., Costco Wholesale Corp., CVS Health Corp. and Target Corp.
-Joseph Checkler and Katy Stech contributed to this article.
Write to Sara Randazzo at sara.randazzo@wsj.com. Follow her on Twitter at @sara_randazzo
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