8:13 p.m. | Updated
MF Global is racing to sell itself before the markets reopen on Monday, with its stock and bond prices nearly in a free fall.
The pressures on MF Global, a commodities and derivatives brokerage firm, and its chief executive, Jon S. Corzine — once the chief of Goldman Sachs and a former New Jersey governor — are enormous. With two major credit ratings agencies having cut their ratings on the firm to junk status, a sale of some kind appears to be MF Global’s only hope for survival.
In the space of only a week, MF Global has shed two-thirds of its market value. Its shares plunged 16 percent on Friday to $1.20, after having briefly dipped below $1 earlier in the day. And its five-year bonds tumbled to 49 cents, according to data from Trace research service.
By Friday afternoon, MF Global executives had become focused on selling the entire firm by Sunday evening, according to a person briefed on the matter who spoke on the condition of anonymity because the discussions were private. Other possibilities, including a sale of just its futures brokerage arm, remained on the table but were becoming less likely.
So far, MF Global has identified fewer than five suitors, a list that includes other brokerage, banking and private equity firms, this person said. Yet while the goal remained to strike a deal before the markets resumed on Monday, it is possible that a deal won’t be reached.
Speculation grew on Friday about who would be interested in buying some or all of MF Global. Several major banks have considered making a bid, especially if they could buy the firm’s well-regarded futures brokerage operations at a low enough price, according to people briefed on the matter. But it was unclear whether any would make a formal offer.
A spokeswoman for MF Global, Tiffany Galvin, declined to comment.
By Friday afternoon, MF Global still had sufficient liquidity to finance its operations, having drawn down a $1.3 billion revolving credit facility, this person added. While more clients had moved their money to other brokerage firms, this person said that the amount remained in the low single digits.
That may not matter if the firm cannot reach a sale over the weekend. While major exchanges around the world said on Friday that MF Global remained a member in good standing, clients and trading partners are generally wary of doing business with a junk-rated brokerage firm.
On Friday, analysts and industry executives were gloomy about MF Global’s survival prospects.
“We continue to believe that in this market environment, selling the entire business could be challenging,” Niamh Alexander, an analyst with Keefe, Bruyette Woods, wrote in a research note.
For now, the firm is focused on selling itself rather than preparing for any sort of bankruptcy filing, the person briefed on the matter said.
Lucas Jackson/ReutersJon S. Corzine
One thing is clear: Any outcome would spell the end of Mr. Corzine’s tenure atop MF Global. He became the firm’s chief executive last year, returning to the financial sector for the first time in more than a decade after having been ousted as Goldman Sachs’s chief executive in 1999.
Mr. Corzine’s chief goal was to transform MF Global into a full-fledged investment bank, in large part by taking on riskier trading using the firm’s own capital. The strategy backfired, however. In the year and a half since Mr. Corzine took over, the firm has earned money in only two out of six quarters.
Among the biggest millstones around the firm’s neck is the $6.3 billion worth of bonds issued by Italy, Spain, Belgium, Ireland and Portugal that it holds. Analysts became uneasy with those holdings as Europe’s debt crisis deepened, culminating in the initial credit rating downgrade by Moody’s Investors Service on Monday.
MF Global’s problems were exacerbated with its announcement of a $186 million loss for its second quarter on Tuesday. By Thursday, Moody’s and another agency, Fitch Ratings, had officially cut the firm’s credit rating to junk status.
Article source: http://feeds.nytimes.com/click.phdo?i=2c640b6afa77cfcbe53bc1b9be39a184
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