Jon Corzine’s MF Global Holdings (MF) continued to seriously struggle after two major ratings agencies downgraded its credit on Thursday due to their significant bond holdings in Europe. The fund has lost most of its value since Tuesday’s announcement that they registered a loss in their second quarter and new rumors have surfaced that all or part of the company may be sold by Monday.
Q2 Loss Prompts Major Sell-Off
Trouble began for MF Global earlier this week when the company’s Q2 earnings report showed a loss of $186.6 million, or $1.16 per share. Former governor of New Jersey and former Goldman Sachs (GS) CEO Jon Corzine heads the fund and he stated in the company’s earnings conference call that the quarter’s results were affected by “the well-reported stressed conditions experienced by global markets” and “conditions of hyper volatility.” However, Corzine would try to bolster shareholder support by stating “while we recognize and respect the challenges of the environment, we also believe it is one with opportunity, filled with opportunity because I’ve noted previously in the stressable time we’ve husbanded our capital and strengthened our liquidity but we’ve also added outstanding producers and feel we have an opportunity to do more of the same in the near term. With a modicum of market normalcy, I believe we will deliver for our shareholders in the quarters ahead.”
Credit Downgrades Follow and MF Tanks
Corzine’s optimism didn’t appear to be enough to save MF Global’s stock price as it plunged over 47 percent on Tuesday. The stock’s free-fall would continue as news that credit rating agencies Moody’s Corporation (MCO) and Fitch Ratings both intended to downgrade MF Global’s rating to one notch above their junk bond status. MF Global’s biggest problem lies in the over $6 billion in short-term European sovereign debt bonds, including over $3 billion with Italy alone. The news of the downgrades prompted another tumble for their stock, losing another 16 percent on Thursday. Friday yielded further losses as the stock dropped another 9 percent on the day. All told, since Tuesday’s quarterly report, MF Global’s stock has lost over 60 percent of its value.
Rumors of MF Buyouts Swirl
Friday morning saw the emergence of several players that might potentially purchase all or part of MF Global Holdings. Goldman Sachs, State Street (STT), and Macquarie (MQG.AX) have all emerged as potential suitors. Some have not approached MF Global yet and are just checking internally to see if a deal it possible, but CNBC reported that MF Global is in advanced negotiations to sell its futures arm, a deal that they hope to strike by as early as Monday.