MF Global Implodes Lehman Brothers Style
MF Global Holdings Ltd. (NYSE:MF) saw its firm implode this week and during the weekend, it will look for help to salvage its remains.
At the helm is Jon Corzine, MF’s chairman and chief executive officer since March 2010. A Goldman Sachs Group Inc. (NYSE:GS) alum, Corzine led the firm’s fixed-income unit and at MF, he had responsibility for the firm’s trading decisions, including its exposure to the Europe’s sovereign debt.
The firm started to unravel after it reported its biggest loss ever on Tuesday in its second quarter fiscal earnings report. It subsequently received a downgrade from Moody’s (NYSE:MCO) Investor Service. The firm noted that MF’s “weak core profitability drove the broker to increase risk buying European sovereign debt.”
On Thursday, Fitch Rating also downgraded the firm to BB+ (junk) from BBB and cited, “Volatile capital markets present MF with significant headwinds in executing its strategic transformation from a pure broker to a broker-dealer and, longer term, to a full investment bank without outsized incremental risk.”
By day’s end, the firm had blown through its revolving credit lines after having $1.3 billion last Tuesday. During the week, it sold part of its $6.3 billion European sovereign-debt exposure.
MF (NYSE:MF) saw its stock drop below $1 on Friday and for the week, it plummeted 67 percent. The week ended with the firm talking to possible buyers for some or all of the battered company; different parties began examining the books. MF is hoping to see a resolution by Monday, if not before.
MF’s (NYSE:MF) stock closed down 16.08% to $1.20 on Friday. Shares are down 85.65% year to date. The stock has traded in a 52-week range between $0.99 and $9.28.