MF GLOBAL HOLDINGS LTD 
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NEW YORK (Reuters) - A bankruptcy judge on Tuesday approved the outline of a plan by liquidators and creditors of failed brokerage MF Global (>> MF Global Holdings Ltd) to repay the company's creditors, a key step toward ending its $40 billion Chapter 11 bankruptcy.
At a hearing in U.S. Bankruptcy Court in Manhattan, Judge Martin Glenn green-lighted the outline, which was amended to address minor concerns Glenn had raised in refusing to approve an earlier version of the outline last week.
MF Global, which had been led by former New Jersey Gov. Jon Corzine, is liquidating after declaring bankruptcy in October 2011. Investors ran for the hills after the company revealed exposure to risky European sovereign debt.
The case became a political fire storm when regulators discovered an estimated $1.6 billion hole in the trading accounts of the broker's trading customers, later determined to be caused by the improper use of customer money to plug liquidity gaps.
Corzine resigned shortly after the bankruptcy, and has denied any wrongdoing.
Under the payout plan, the company's trader customers would be repaid in full. Louis Freeh, the trustee liquidating the MF Global parent, has agreed if necessary to support an effort by customers' trustee James Giddens to allocate some of the parent's assets to customer accounts to ensure their full recovery.
Unsecured creditors of the MF Global parent are projected to recover between 13.4 cents and 39 cents on the dollar, while creditors of its finance unit will receive between 14.7 cents and 34 cents on the dollar.
Creditors under a $1.2 billion loan, including JPMorgan Chase & Co (>> JPMorgan Chase & Co.), will receive between 13.4 cents and 39 cents on the dollar under the plan.
The latest version of the plan includes arguments, raised by JPMorgan earlier this month, that creditors may be getting undercut. A portion of the loan facility was transferred from MF's parent to its finance unit prior to bankruptcy, resulting in the finance unit owing money to both the holding company and the lenders. Eliminating that duplication could mean more recovery for the lenders, JPMorgan has argued.
Tuesday's approval paves the way for creditors to vote on the plan itself. Assuming they support it, the plan would go before Judge Glenn for final confirmation in April.
The proposal already has the support of a majority of unsecured creditors. It was put forth by Freeh in conjunction with a group of hedge fund creditors, led by Silver Point Capital, Knighthead Capital and Cyrus Capital Partners, who hold more than 65 percent of the company's $2.2 billion in unsecured claims.
The case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.
(Reporting By Nick Brown; Editing by Nick Zieminski)
By Nick Brown
