Distressed MF Global Is Trying To Sell Its Futures Brokerage, Goldman Buying MF Assets?

MF Global Holdings (MF) Stockcharts.com

MF Global (MF), a world leading broker-dealer for "futures and options, commodities, fixed income, equities and foreign exchange" run by John Corzine, closed at $1.20 today, down from $4 at the beginning of October. MF Global's bonds maturing on 8/8/2016 (MF.AD, 6.25% 6.25% fixed coupon, FINRA has variable not sure why) last traded at 49 cents on the dollar with a 25.20% yield (source: TRACE at finra.org). Are there credit default swaps? MF Global is also "one of the 22 primary dealers authorized to trade U.S. government securities with the New York Fed". It looks like MF is on the wrong side of a few trades in european sovereign debt, or actually repurchase agreements collateralized by euro government bonds.

Bloomberg on their exposure:

"The firm, which has a market value of $198 million, holds $6.3 billion of sovereign debt from Italy, Spain, Belgium, Portugal and Ireland that it’s using in repurchase agreement trades with customers." (Bloomberg)

MF was just downgraded to junk by Moody's and Fitch, and, according to Reuters, some MF Global clients are pulling their money from the brokerage. As a result, MF Global tapped two credit lines and is now trying to sell-off its futures brokerage unit to raise capital ($765 million?).

Dick Bove, analyst at Rochdale Securities, thinks Goldman Sachs is scooping up MF Global assets at distressed prices, and believes they will make a "huge windfall profit" (watch after jump). This reminds me of Dick Bove talking about Lehman on Bloomberg in August 2008 during the financial crisis! The Wall Street Journal, via Fox Business, mentioned there were other firms interested as well. Watch Charlie Gasparino, of Fox Business, explain what's going on after the jump.

"According to The Wall Street Journal, Goldman, State Street and Australia’s Macquarie are all either eyeing New York-based MF Global or its parts. Other firms may also be looking at the company, but any deal would be expected to happen quickly as its stock plunged below $1 on Friday." (Fox Business)

Update: J.C. Flowers, MF Global in Talks (DealJournal). J.C. Flowers already owns 6% of MF Global's preferred stock and is on the board. J.C. Flowers injected $300 million into MF in 2008 after the firm suffered $141 million in trading losses from rogue trades in wheat futures. According to DealJournal, "they cautioned a deal may not happen". Seems like principal trading activities have worked out quite well for financial institutions recently (wtf?).






Source: http://www.bloomberg.com/video/79019252/






Source: http://www.foxbusiness.com/industries/2011/10/28/goldman-to-rescue-suitors-circle-mf-global-parts/


Remember this? MF Global Plans Bond Sale With Coupon Tied to Corzine’s Role (Bloomberg)