MF Global, one of the world’s largest brokerage firms, is on the brink of collapse, according to reports in The Wall Street Journal (WSJ), after chairman and CEO Jon Corzine allegedly spent the weekend scrambling for a buyer, while the company’s holding company looks to file for Chapter 11 bankruptcy protection.
MF Global has faced a severe slash to two of its credit ratings, pulling them down to junk level, after announcing its quarterly loss of $191.6 million on October 25.
On October 27, Fitch ratings agency placed MF Global Holding on Rating Watch Negative and adjusted MF Global’s Issuer Default Ratings (IDR) to BB+/B, from BBB/F2 due to “increased risk taking activities [that] have resulted in sizeable concentrated positions relative to the firm's capital base, leaving MF vulnerable to potential credit deterioration and/or significant margin calls”.
Meanwhile, Moody’s Investor Services followed in Fitch’s footsteps and downgraded MF Global Holdings long-term credit ratings to Ba2, which is two levels below the lowest investment grade rating.
MF Global has apparently hired the law firm Weil, Gotshal & Manges LLP – which represents Lehman Brothers Holdings – as a London affiliate, to help it navigate through discussions with five potential buyers for all or parts of the company, according to unnamed sources in the WSJ article.
Its sources also said that MF Global may file for Chapter 11 as early as Tuesday.
Today, the Federal Reserve Bank of New York informed MF Global that it has been suspended from conducting new business with the New York Fed.
"This suspension will continue until MF Global establishes, to the satisfaction of the New York Fed, that MF Global is fully capable of discharging the responsibilities set out in the New York Fed’s policy, “Administration of Relationships with Primary Dealers,” or until the New York Fed decides to terminate MF Global’s status as a primary dealer," said the New York Fed in a statement.
MF Global has yet to return calls or emails to Euromoney on this report.