MF Global went under bankruptcy protection, according to an official statement quoted by Bloomberg. MF Global was one of the largest derivatives brokers in U.S. and was headed by a former chief of Goldman Sachs. According to Bloomberg, Jon Corzine led the group that went bankrupt after making bets on sovereign debt in Europe. MF Global had an exposure on European bonds of $6.3 billion. Last year the company invested heavily in Italian, Spanish, Portuguese and Irish bonds, betting that they will return to growth this year.
On October 25, the company reported a quarterly loss of 191.6 million dollars and, following the fact that the agencies downgraded it to the “junk” level, tried selling to avoid bankruptcy. MF Global was part of ED&F Man Group, a company that has its roots in 1783.
Goldman shares, down
Following the announcement made by MF Global, shares of investment bank Goldman Sachs Group recorded a drop of almost 4%. The company board met in New York this weekend to consider options including a sale to avoid bankruptcy, according to sources close to discussions.
MF Global shares fell 67% last week
The company was stopped to deal with the New York Fed until it proved that it was able to fulfill its responsibilities as primary dealer, according to the announcement posted on the website of supervision institution. MF Global shares have also been halted from trading. The pressure is increasing on Corzine, former New Jersey governor and U.S. senator, after MF Global shares fell 67% last week, and its bonds were trading to a loss following information regarding company’s bets on sovereign debt in Europe.
MF Global has been in talks with five potential buyers for the entire stake or part of it, including banks, private-equity funds and brokers, according to sources who asked not to disclose their identity because the negotiations were private. “While the parties seem attracted, finding potential buyers is increasingly difficult to achieve. In the current context, banks can’t do anything without permission from their supervisors, leaving room to purchase to the brokerage companies seeking to increase the level of transactions and expand their risk-taking activities”, said Robert Rutschow Friday, analyst at CLSA Credit Agricole Securities in New York.