Oil major ConocoPhillips and James Giddens, the liquidator of commodity broker MF Global Inc, look set to resolve a dispute over letter of credit (L/C) proceeds in court.

ConocoPhillips posted US$205 million of L/Cs rather than cash as margin for its trading accounts with MF Global before the commodity broker went bankrupt.

Arguments

The oil major argues that because the L/Cs expired without being drawn upon before MF Global was declared bankrupt, the documents should simply be cancelled.

The liquidator disagrees, arguing that the L/Cs should be treated the same as if cash was posted, in which case ConocoPhillips would only be entitled to receive the same percentage in distributions as other creditors.

Court decision

A US judge ruled last week that the case would be heard in December in a district court rather than by a bankruptcy judge.

Judge Katherine Forrest reasoned that the district court was the appropriate venue for the case because it involves non-bankruptcy law.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.