MF Global Taps Credit Facility, Burns Through $2 Billion In Quarter

Tyler Durden's picture

Update: and the hits just keep on coming, first Fitch and now... MF GLOBAL CUT TO JUNK BY MOODY'S... "At the end of the second quarter, MF Global's $6.3 billion sovereign risk exposure represented 5 times the company's tangible common equity. Moody's said the downgrade reflects our view that MF Global's weak core profitability contributed to it taking on substantial risk in the form of its exposure to European sovereign debt in peripheral countries." But other major US banks have no exposure whatsover right? Oh wait...They're hedged... Through "CDS".

Bloomberg has just broken that MF Global has likely just entered a terminal deathwatch after not only tapping its credit facility, but aslo exhausting it. From Bloomberg: "MF Global Holdings Ltd., the futures broker run by Jon Corzine, drew down its revolving credit lines this week as the firm reported its biggest quarterly loss and had its credit ratings cut, said three people with knowledge of the matter. The New York-based company exhausted its revolving lines, the people said, speaking on condition of anonymity because the move wasn’t disclosed. MF said in an Oct. 25 investor presentation that it had $1.3 billion in unused revolving credit facilities, without giving a date for the tally." This development means that instead of an M&A assignment as many were attributing the retention of Evercore bankers to (despite the dreary presence of David Ying in their midst), Jon Corzine's firm was far more likely focused on salvaging anything of value. However, now that traditional M&A is out of the picture (nobody in their right mind will pay anything close to market value for a company without cash), it is quite likely that the firm's bondholders, who most likely also have collateral exposure with MF global, whose plight started following the disclosure of extensive European exposure and which was downgraded to junk today by Fitch, will pull all liquidity and instead opt for a debt for equity conversion either in court or as a prepack. What is probably the biggest  take home here is just how much of a capital drain European exposure (and we are confident MF was "hedged".... just like Morgan Stanley) can become, and how quickly a firm can become completely insolvent. As a reminder, the firm reported $710 million in cash as of June 30. Obviously all of that cash must have been burned through if the firm also not only tapped but exhausted its $1.3 billion in revolvers in the past quarter (which have rating associated rate step ups, which don't take too kindly to a junk rating). Net result: $2 billion in cash (or about 9 times its makret cap) burned in 4 months primarily due to "hedged" European exposure.

As for whose problem MF is now, according to the recently launched credit facility, JPM is admin agent on at least the smaller $300 million credit facility. Which means that it is now a counterparty risk to Jamie Dimon. In other words, and we would not put it past them, Goldman may have pulled a Dexia and AIG on MF Global, with a spie in collateral calls, in the process sticking Jamie Dimon with the bill. Whether or not Goldman would dare to do this to the firm of its former CEO is a different question... But one most likely answered with a resounding yes.

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knukles's picture

NJ taxpayers should be elated.

max2205's picture

Probably short euro and long short 3x's. Good job Ben on blowing some more businesses out of the water

max2205's picture

Btw thanks a shit load of $ to blow through. 15x no doubt

Careless Whisper's picture

run by Jon Corzine

where have i heard that name before? oh yeah, he was the ceo of an investment bank that is now a really big hedge fund. and the name of it is... anyone? bueller? bueller? bueller?



Don Birnam's picture

The Moody's Kraken has feasted upon the live, insolvent body of that slithering scion of the Vampire Squid. Verne or Melville could not have devised a more satisfying plot.

Melin's picture

I don't get it.  Doesn't this just mean the fiat blower machine will be turned in MF's direction?

machineh's picture

You know the song [to the tune of 'Big John']:

Red Jon,

Red Joh-ohn,


He wrecked New Jersey ... now he wrecked MF!

When are folks gonna figure out that this well-heeled socialist dilettante is real bad news?



FreedomGuy's picture

Yes, my favorite Corzine moment was when his State Trooper drivers wrecked his government SUV by doing 90+ on wet roads. He was not wearing his seatbelt either as required by law.

So given that and MF can we call him "Crash Corzine"? Seems appropriate.

Raskolnikoff's picture

Socialism always has two books, one for the 'sheeple' and one for the guy in charge. If you're lucky, the guy in charge will be nice and merciful to you. But human nature as it is, socialism will always give you a Joe or a Mao for your troubles. Problem with Jon and Barry is they start to believe just how smart and powerful people say they are and then the air bag of reallity pops out in their faces and wakes'em up.

FreedomGuy's picture

Exactly right! My saying is "Socialism is for losers and aspiring autocrats." which feeds right into your comments.

natty light's picture

Before I even got to the comments, when I saw John Corzine mentioned, I thought: he burned through New Jersey's capital, too.

lolmao500's picture

Whether or not Goldman would dare to do this to the firm of its former CEO is a different question... which is obviously answered with a YES.

Like Goldman has any moral. Mwahahahaha.

And what is 300 million today? It's chump change.

Logans_Run's picture

I believe that if given the opportunity Lloyd would phuque Ben over.

upWising's picture

$300 million?  Chump Change?  Squid Change sounds better.  Kind of like those pennies in the tray next to the cash register down at the mini mart.

ss123's picture

These guys are burning through 2 billion dollar credit lines and Joe Schmoe can't get a piddly little loan from the bank.

navy62802's picture

Normal people exist in an entirely different world from the one these guys know. Out here in the jungle, it is a depression.

nope-1004's picture

Banks give loans?

Since when?

Oh ya..... they will if you've got 100% collateral in some other form of liquid asset.   But if you've got the money, why would you need a loan?  Even then, they'll make you sign a personal guarantee.

Banks ARE NOT in the business of LENDING.

They are in the business of STEALING.


Marco's picture

Unless you are another bank with a Moody stamp of approval, then they will lend each other as much money as they could want to dig a deeper hole for their shareholders while handing out bonuses.

ac3's picture

Thanks for playing bitchez

Hedgetard55's picture

And.... it's gone.

Cdad's picture

Serious "horse fixing" going on in the AH session...including manipulations of FAZ, SPY, GLD, name just a few.  But as usual, I'm sure Mary Schapiro will get right on it...just as soon as she is done taking notes in L. Blankfein's office about what SEC regs she should just forget about.

There is no market anymore.

**This was a single firm all trades came off together at 6:30.  Six sigma moves all around**

HyperLazy's picture

I saw that spike of activity at 6:27 to 6:28. BAC, JPM and C dove and rebounded. FAZ reacted, hit some stops and 75,000 FAZzies were released.


Cdad's picture

These late AH trades are about resetting technicals [as well as the obvious free money angle].  Could just be Chinabot, as well.

But the trades should all be busted...but won't they are executed through alternative venues and cannot be tracked.  Thank you Duncan Niederauer.

HyperLazy's picture

Just took a look at FAS. Volume of FAS at 6:28 was 517,589.

I can't figure out what the target of this event was; the stocks, the leveraged ETFs, loading, unloading, consolidating or dislodging positions.

Probably all of the above - in the iVernacular, LOL

Cdad's picture

It is hard to say what it is...because this is no longer a market.  But I'm sure Mary Schapiro cares about preserving the I'm sure she will get right on it and figure out who it was that fixed horses in the AH tonight at 6:28 cst.  I'm so sure she will that I am now holding my breath and awaiting the announcement...

UP Forester's picture

She's too busy investigating Avon, which apparenty gave her cosmetics that made her fugly....

Yen Cross's picture

Nice to have you back. Thanks yen

J 457's picture

Look at TZA and TNA in AH.  Something not right....

HyperLazy's picture

Spent the last couple hours looking at all sorts of goodies. 6:27 to 6:28 was extraordinary. Stocks like S, GM, F, H and PFE experienced up to 20% swings. I have seen these kind of moves before on individual items and across small ranges, but not across this many equities at once. But yeah, when this many stocks get jerked around the corresponding ETFs get yanked around too.

HFT on the verge of berzerk? Exchange data centers puking?


Edit: Does Nanex have anything on this? LOL

Racer's picture

Once you get sucked into a whirlpool of debt, initially the waters seems calm and relaxing but then it starts to speed up, slowly at first and it doesn't appear as if anything is too much wrong... but then it speeds up more... and more and then before the banksters know it they are sucked into oblivion

slewie the pi-rat's picture

that would make a good thesis topic, Racer: 

"Edgar Allen Poe On Banking"

UP Forester's picture

I think we've passed the Event Horizon a few light-years back.

The only thing that can save us now are the neutrinos from a plutonium life-preserver....

Marco's picture

Yeah, before you know it some of them will have to retire to their life of yachting around the world ... oh the horror. The only thing which might suck them to oblivion is a Somali Pirate.

jcaz's picture

Lemme guess-  Corzine's parachute is $710M.....

Seasmoke's picture

Corzine is running MF about as good as he ran New Jersey.......into the ground

lolmao500's picture

Well good. New Jersey deserves to be into the ground.

Cursive's picture


LOL.  You mean about as well as he ran the governor's Suburban off the guard rail?  Looks like he hedged about as well as he wears seat belts.

dick cheneys ghost's picture

Perhaps we have room for Corzine at Treasury, or maybe the Fed could use him.........

NoTTD's picture

What did you expect?  There is only one pool of mediocrity where  Corzine could flourish - and he's already screwed NJ and the nation.  His failure at this was a dead bang certainly.

lizzy36's picture

You forget.

Corzine was CEO of Goldman Sachs. Until he want away one weekend and from the back seat of his car Hank Paulson staged a coup. That is a true story.

nmewn's picture

There is no honor among thieves.

azusgm's picture

More, please. Link?

I love a good dirtbag story.

mynhair's picture

Corzine for DNC chair!  Let's get rid of the hydra.

And be rid of that Wasserman-Schultz moron.

Zero Bid's picture

CVA = counterparty valuation adjustment?