Shares and bonds of MF Global continued to tumble on Friday as the embattled commodities and derivatives brokerage firm raced to line up a sale of some or all of itself as soon as this weekend.
MF Global’s stock fell more than 4.5 percent by Friday afternoon, to $1.37, after having fallen below $1 earlier in the day. Meanwhile, the firm’s five-year bonds plummeted to 53.4 cents on the dollar, according to data from Trace.
And the prices of MF Global’s loans in the secondary market have also fallen, according to Reuters Loan Pricing Corporation. The firm’s extended revolving credit line maturing in 2013 has fallen to 60 to 65 cents on the dollar, while a non-extended revolver due next year has fallen to 65 to 70 cents on the dollar, the service said.
Analysts and financial industry players widely expect MF Global — which is run by Jon S. Corzine, the former Goldman Sachs chief and former New Jersey governor — to grasp for some sort of deal by the end of the weekend, after two major credit ratings agency’s downgraded the firm to junk status late on Thursday. With a credit rating that low, MF Global has likely lost clients and trading partners unwilling or unable to do business with such a low-rated brokerage.
At the same time, investors and clients were unnerved by news that the firm had tapped out its $1.3 billion revolving credit line to MF Global’s parent company. Doing so, however, helped bolster the firm’s liquidity position, at least for the moment.
David Goldman for The New York TimesJon S. Corzine, the chief executive of MF Global, has tried to figure out ways to promote the firm’s financial strengths.
At the moment, MF Global is weighing a sale of its futures brokerage, known as its FCM unit, people briefed on the matter previously told DealBook. At the moment, it has identified approximately five potential buyers, one of these people said.
MF Global is exploring alternatives as well, including a possible sale of the entire firm.
“We believe MF could generate proceeds from sale of its customer asset portfolio or FCM which frees up capital,” Niamh Alexander, an analyst at Keefe Bruyette Woods, wrote in a research note on Friday. “However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity.”
Unsurprisingly, many of Wall Street’s major players have considered making a bid for some or all of MF Global, although it is unclear whether they will actually enter talks or make an offer.
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