Business World

Thursday 27 July 2017

Eurozone crisis drives MF Global to file for bankruptcy

Jon Corzine. Photo: Getty Images
Jon Corzine. Photo: Getty Images
Peter Flanagan

Peter Flanagan

THE eurozone crisis claimed its highest-profile victim yesterday when the giant futures brokerage MF Global filed for bankruptcy in the US.

The firm, which had assets of some $41bn (€30bn), filed for Chapter 11 bankruptcy in New York, capping a tumultuous period that had seen the share price fall by 67pc in a week after it revealed a record quarterly loss and warned of its $6.3bn exposure to eurozone bonds, including Irish bonds.

The filing came after frantic efforts to secure a buyer for the 200-year-old firm over the weekend failed yesterday.

The end came quickly after the New York Federal Reserve suspended MF Global from conducting new business with the central bank. Exchange operators CME Group IntercontinentalExchange and Singapore Exchange Ltd as well as Singapore's central bank all halted the broker's operations in some form except for liquidations.

The bankruptcy is the seventh largest in US history by assets -- but unlike the mammoth bankruptcy by Lehman Brothers three years ago, it is not expected to send markets into a tailspin.

There was little evidence of any severe ruptures in commodity markets, although volumes were down sharply as investors said they preferred to wait for more clarity before placing new trades.

The collapse of the company is a huge blow to the former Goldman Sachs chief executive Jon Corzine who had aggressively moved MF Global into higher risk dealing in the search of higher returns.

The company's shares and bonds plunged in recent days. In the past week, MF Global posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

Transform

Mr Corzine was trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But the company was also suffering because of low interest rates, which hurt profits from core brokerage operations.

It may be easier for MF Global to work out a sale in bankruptcy than outside of it, said Bill Brandt, chief executive of Chicago-based turnaround firm Development Specialists.

By filing for bankruptcy, MF Global freezes the value of its free-falling notes and gives potential suitors a clearer picture of the losses they would be taking on, Mr Brandt said. (Additional reporting by Reuters)

Irish Independent

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