MF Global slumps 47% on unexpected loss

Discussion in 'General Topics on Brokers' started by sammus, Oct 26, 2011.

  1. CEO is former GS Chief exeutive, and New Jersy governor, who blamed a
    volatile market over the summer, which he said was “as difficult as I have
    experienced in my 30 years” in the business – though he noted he was
    governor of New Jersey and not in finance during the turmoil of 2008.

    http://www.ft.com/cms/s/0/75e8b628-ff13-11e0-9b2f-00144feabdc0.

    Shares in MF Global, the broker-dealer run by former Goldman Sachs chief
    executive Jon Corzine, dived by almost half on Tuesday, after the company
    reported an unexpected second-quarter loss and on worries its debt could be
    downgraded to “junk” status.

    MF Global had brought forward its earnings by two days, after Moody’s on
    Monday night downgraded its long-term debt from Baa3 to Baa2 and said it was
    considering a further downgrade, which would give the company a non-
    investment grade rating. The rating agency said it was worried about MF
    Global’s earnings power, leverage and risk management – the latter because
    of exposure to European sovereign debt.

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    Shares in the company fell $1.69, or 47.6 per cent, to $1.86.

    “If market volatility stays elevated, we question how the firm is going to
    achieve the earnings necessary to avoid a downgrade of its debt to junk
    status, which in turn could materially impact its ability to act as a
    counterparty as well as raise MF’s cost of debt,” said Patrick O’
    Shaughnessy, analyst at Raymond James in a note to clients.

    MF Global reported an adjusted net loss of $0.09 per share for the second
    quarter compared with earnings per share of $0.02 in the same period last
    year. Analysts had expected earnings per share of $0.05.

    Including restructuring costs, retiring debt and deferring tax assets, the
    loss was $1.16 a share or $191.6m compared with a loss of $94.3m last year.
    Net revenues for the three months to the end of September fell from $240.3m
    to $205.9m.

    “We make no excuses – these results must be reversed,” said Mr Corzine,
    MF Global chairman and chief executive. He blamed a volatile market over the
    summer, which he said was “as difficult as I have experienced in my 30
    years” in the business – though he noted he was governor of New Jersey and
    not in finance during the turmoil of 2008.

    Principal trading revenues in the quarter fell 90 per cent compared with the
    first quarter to $12m, which MF Global said was a deliberate retrenchment
    from the wild markets.

    Worries over Europe – as for the larger Wall Street investment banks –
    hurt trading. But MF Global was also hit by specific concerns that it has
    too large an exposure to European debt. It said that it had $6.3bn in short-
    term debt exposure to Italy, Spain, Belgium, Portugal and Ireland.

    Meanwhile, CIT Group, the small-to-medium sized business lender run by
    another Goldman alumnus, John Thain, reported a quarterly loss of $16m
    compared with a net profit of $116m a year ago. Pre-tax profit was $14m.
     
  2. 《期货日报》:曼氏债券评级被降至接近垃圾级
    http://www.qhdb.com.cn/Article/Show.aspx?aid=84447&id=313
    发布日期:2011-10-27 1:10:16 来源:原创 浏览:466
    周一穆迪把曼氏金融集团(下称曼氏)的债券评级下调至Baa3,因担心其过高的风险偏好以及持有的欧洲主权债务敞口风险。截至北京时间27日凌晨,公司股价在纽交所下跌近27%,为每股1.40美元,周二已跌47.61%。
    据称,穆迪还在评估另一场降级可能,因为目前“低利率环境和动荡的资本市场条件“使得曼氏近期可能无法实现穆迪为其设定的至少2亿美元税前利润并维持20%或更小杠杆率的财务目标。
    据悉,因担心在欧债上的风险敞口风险,美国金融业监管局8月已要求曼氏提升资本。据报道,曼氏通过回购交易抵押过程,在意大利、爱尔兰、葡萄牙、比利时和西班牙的主权债务上共有60亿美元的净风险敞口,而6月底其总资产规模为450亿美元。
     
  3. its unlikely that MF will have a hard crash, like Refco or Lehman. but it seems to me most US-based FCMs are somewhat in trouble.
     
  4. MF Global Reviewing Strategic Options: Report

    NEW YORK (Reuters)—Futures brokerage MF Global Holdings Ltd. has hired at least two investment banks to review its strategic options — including a possible sale of the company — after its stock price plummeted this week, The Wall Street Journal reported.
    The New York-based brokerage has hired Evercore Partners and at least one other bank, the Journal said, citing a source familiar with the matter.

    Former Goldman Sachs executive and New Jersey Governor Jon Corzine has been reshaping MF Global into a commodities-based investment bank, taking steps such as ramping up trading risk. But Moody's Investors Service cut the company's debt ratings to a step above junk on Monday [Oct. 24], citing concerns about MF Global's European sovereign debt holdings. Standard & Poor's said on Wednesday [Oct. 26] it might cut the company's counterparty credit rating to junk.

    MF Global's troubles began boiling over in August, when the Financial Industry Regulatory Authority ordered it to boost capital levels due to the U.S. subsidiary's European debt exposure. The company posted a $191.6 million shareholder loss on Tuesday [Oct. 25], in part because it scaled back its risk taking as markets tanked.

    Since Monday morning, MF Global's shares have fallen 54 percent, including a 8.6 percent drop to close at $1.70 on Wednesday on the New York Stock Exchange.

    MF Global's board voted this morning to review alternatives that could include asset sales, a merger or selling the entire business, the newspaper said.

    A spokeswoman for MF Global and a spokesman for Evercore Partners declined to comment.

    MF Global would possibly join Newedge, a big futures and clearing brokerage, on the selling block. A source told Reuters last month that Société Générale had put its stake in Newedge up for sale. The French bank co-owns Newedge with Credit Agricole.

    But businesses diverge at the two brokers.

    Newedge in August was the second-biggest Futures Commission Merchant, by customer funds, with $22.3 billion, according to U.S. government data. MF Global was eighth with $7.3 billion.

    And unlike Newedge, MF Global has increasingly relied on proprietary trading and research.

    Mr. Corzine, 64, joined MF Global in 2010, with the aim of turning around the ailing broker after he lost his re-election bid as governor of New Jersey.

    MF Global was spun off from former parent Man Group Plc in 2007, in a $3 billion initial public offering, one of the largest that year. But problems soon emerged.

    In 2008, the company revealed a broker's trades resulted in a $141.5 million loss on wheat futures in a six-to-seven hour period. Investor lawsuits ensued.

    MF Global, its former parent company and three dozen underwriters agreed in August to pay $90 million to settle the suit, which alleged the company misled investors about its risk management.

    Mr. Corzine pushed to turn the company into a commodities and capital markets-focused investment bank, modeled after Goldman Sachs, where he was chief executive in the late 1990s. MF Global became a primary dealer in February, authorizing the company to deal directly with the government in selling U.S. debt and to trade directly with the Federal Reserve Bank of New York for monetary policy.

    That same month, Mr. Corzine said in MF Global's quarterly earnings announcement that the shift to being a capital markets investment bank could "fundamentally change our growth trajectory and profitability profile" by delivering more services to clients.

    "I believe our new model will create a growing and diversified revenue base, which will allow MF Global to deliver stable, double-digit returns to shareholders," Mr. Corzine said in the company's earnings release on Feb. 3.

    But the change has yet to translate into earnings. Through the first six months of the company's latest fiscal year, MF Global has posted a net loss of $183 million, or $1.11 per share. As of Sept. 30, the company's net worth as measured by its book equity was $1.23 billion.

    Mr. Corzine is viewed by the company as critical to overall operations. In August, an MF Global bond issuance included an unusual provision that investors would receive an extra percentage point of interest if he was named to a government post by a U.S. president by July 1, 2013.

    MF Global also disclosed it had bet $6.3 billion — more than 10 percent of its total assets — on an optimistic view of European sovereign debt.

    By Joe Rauch; additional reporting by Jonathan Spicer and Ann Saphir

    http://www.hedgeworld.com/news/read_newsletter_aa.cgi?section=dail&story=dail19545.html