|Jon Corzine, chairman of MF Global Holdings, is understood to have made big bets on eurozone bonds [Reuters]|
The US brokerage firm MF Global has filed for bankruptcy protection after revealing $6.4bn of eurozone debt exposure.
MF Global’s meltdown has made it the biggest US casualty of Europe’s debt crisis, and the seventh-largest bankruptcy by assets in US history.
MF Global worried markets last week after disclosing a $191.6 quarterly loss, which saw its shares fall by two-thirds, and its credit rating cut to junk.
Shares in MF Global were suspended in New York on Monday evening, with shares on Wall Street tumbling as a result.
The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to its rival Interactive Brokers Group of London.
Chapter 11 postpones a US company’s obligations to its creditors, giving it time to reorganise its debts or sell parts of the business.
Shares in JPMoran and Deutsche Bank, two of the firms biggest creditors also took a fall on the news of Chapter 11, as both banks are owed a total of $2.2bn.
Regulators had expressed “grave concerns” about the viability of MF Global, only after “no viable alternative was available in the limited time leading up to the regulators’ deadline,” the company’s chief operation officer, Bradley Abelow, said in a court filing hearing.
Jon Corzine, who took over as chief executive of MF Global last year, is understood to have made big bets on sovereign bonds issued by European countries.
But the severity with which markets and regulators reacted to MF Global’s troubles may have surprised Corzine, whose affinity for risk-taking finally caught up to him after a career that took him to the top echelons of Wall Street and then into politics, first as a US senator.
The bankruptcy is reminiscent of 2008 when Lehman Brothers collapsed at the height of the financial crisis.
MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.
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.
MF Global’s roots go back nearly 230 years to a sugar brokerage on the banks of the River Thames in London.
The firm was spun off from a hedge fund in 2007 and is one of the world’s largest players in exchange-traded futures and options.