On Oct. 24, Moody’s Investors Service cut the New York- based company’s ratings to Baa3 from Baa2, one level above junk status, citing its holdings of European sovereign debt and inability to hit earnings targets. This week, the firm reported its biggest quarterly loss ever, shares plummeted 54 percent and the firm’s 6.25 percent bonds issued in August fell into distressed levels.
Chief Executive Officer Jon Corzine, 64, who helped run Goldman Sachs Group Inc. from 1994 to 1999, increased the firm’s risk and used its own money to trade, including investments in European sovereign debt. Corzine began adding sovereign debt of Italy, Spain, Belgium, Portugal and Ireland about a year ago, according to a company presentation. The positions accounted for 16 percent and 12 percent of net revenue in the quarters ended in March and June, the firm said.
MF Global, which had a market value yesterday of $280.3 million, holds $6.3 billion of sovereign debt that it’s using in repurchase agreement trades with customers. MF Global reported its worst-ever quarterly results on Oct. 25, losing $191.6 million in the three months ended in September.
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