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MF Global Taps Credit Facility, Burns Through $2 Billion In Quarter
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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NJ taxpayers should be elated.
cut to junk
Probably short euro and long short 3x's. Good job Ben on blowing some more businesses out of the water
Btw thanks a shit load of $ to blow through. 15x no doubt
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?
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.
I don't get it. Doesn't this just mean the fiat blower machine will be turned in MF's direction?
You know the song [to the tune of 'Big John']:
Red Jon,
Red Joh-ohn,
RICH RED JON!
He wrecked New Jersey ... now he wrecked MF!
When are folks gonna figure out that this well-heeled socialist dilettante is real bad news?
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.
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.
Spot on!
Exactly right! My saying is "Socialism is for losers and aspiring autocrats." which feeds right into your comments.
Before I even got to the comments, when I saw John Corzine mentioned, I thought: he burned through New Jersey's capital, too.
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.
I believe that if given the opportunity Lloyd would phuque Ben over.
So you haven't heard?
$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.
These guys are burning through 2 billion dollar credit lines and Joe Schmoe can't get a piddly little loan from the bank.
Normal people exist in an entirely different world from the one these guys know. Out here in the jungle, it is a depression.
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.
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.
Thanks for playing bitchez
And.... it's gone.
POOOF
Serious "horse fixing" going on in the AH session...including manipulations of FAZ, SPY, GLD, TLT...to 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 event...as all trades came off together at 6:30. Six sigma moves all around**
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.
Hmmm....
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 be...as they are executed through alternative venues and cannot be tracked. Thank you Duncan Niederauer.
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
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 market...so 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...
She's too busy investigating Avon, which apparenty gave her cosmetics that made her fugly....
Nice to have you back. Thanks yen
Look at TZA and TNA in AH. Something not right....
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? wow.just.wow
Edit: Does Nanex have anything on this? LOL
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
that would make a good thesis topic, Racer:
"Edgar Allen Poe On Banking"
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....
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.
Lemme guess- Corzine's parachute is $710M.....
Corzine is running MF about as good as he ran New Jersey.......into the ground
Well good. New Jersey deserves to be into the ground.
@Seasmoke
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.
http://www.freerepublic.com/focus/f-news/1817231/posts
Perhaps we have room for Corzine at Treasury, or maybe the Fed could use him.........
Do Not Give Them Any Ideas
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.
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.
There is no honor among thieves.
I concur+1
More, please. Link?
I love a good dirtbag story.
Corzine for DNC chair! Let's get rid of the hydra.
And be rid of that Wasserman-Schultz moron.
CVA = counterparty valuation adjustment?
Credit Valuation Adjustment, or was that a joke? nm.
Lehman .20
just like europe!
now, they need enhanced credit @ MF, too!
corzine: why, hello, timmah! to what do i owe the pleasure of this call?
timmah: EAT ME!!!
I truely hope they have started to feed on each other. That will be fun.
Taylor this has to take someone else down, any ideas?
Taylor dardin? The evil twin?
7 am pool call time
10:45 daily briefing
4pm - meet with Shillary
5 pm attend Di Wally reception (some Hindu shit)
ODumma's schedule for tomorrow.
More than your typical OWS drone could handle.
Genius speaks:
In normal times, what happened at MF Global would have been forgotten and we would've moved on the next quarter, says Dick Bove. But these are hysterical times, where anything that happens to a financial company gets magnified way out of proportion to reality.So now, what we have to worry about is a run on a company that's actually solvent.
How this man still has a job is proof that an idiot and his money are usually some bigger idiots bonus.
Sounds like Karl Rove....
that's exactly how you run a bank these days. Now who's "the MAN"?
http://www.youtube.com/watch?feature=player_detailpage&v=Uhmg3KIT50Q
Hm. Looks like fun. I don't get it? So you finance a truck company? Doesn't seem to complicated.
"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.
Funny how all the big banks are more leveraged than that...
tip of the iceburg?
@Irish66
Whoa oa...Domino!
We know what sharks do when they smell blood in the water. How about squid? Look like it's the sharks, er the SQUID, at feeding time. (Don't forget the ketsup).
This must be part of the plan. Let MF Global fail, let the CDS pay out, and TPTB can then say "See? CDS are still valid investments! That Greece thing was just a one-off exception to the rule, that will never, ever be repeated! Keep on keepin' on!"
Crap, I was gonna buy. Luv those pennies!
It's the inevitable progression of the system. People bitch about Government employees getting huge salaries and bonuses but they don't stop to think that the government has to either add employees or torque up existing employees to keep the ponzi running. If the employees do not get megabuck IRA's then they can't buy megaton shitloads of stock which means that they can't give mega money to corporations which means they can't pay their employees.
It's the exact same dynamics as the housing market. The people who owe money on the mortgate have to shrink and leach the population they work with in order to pay it back. The government runs off paying it back double and the ponzi's collide. Eventually you ar forced to not only attempt a house flipping rising real estate market which stresses too much the real economy but you are forced to start countefeiting mortgages which is all MERS really is. It's not about chopping up the mortgages it's about untracking them so you can then countefeit both their money creation and their fake repayments.
In the stock market the system starts out with real investors and real suckers who can be wiped to nothing without flinching as unsecured creditors. But as it runs like I said above the government employees become more and more a part of the entanglement. So essentially bleeding the stock market to transfer wealth stops working. This leaves you with the only other alternative. Banks lending way above market cap on investment firms knowing that it'll just go into the taxpayer black hole. Only the problem is as the various machinations of the system become more and more convoluted you end up wtih a population completely divested form it. And you're wealth transfer mechanisms go from stupid people. To your own kind because that's the only place with money left to tap. So it starts out being externally harmful and then morphs into internally harmful.
I mean think about the ponzi progression. Madoff was reliant on more and more whales to keep the ponzi running. The goverment is reliant on bigger and more affluent government as the ponzi has become self referential in their case. If government shrinks then that's less ipo buying by open market operations which is less corporate cash which is less corporate employees. Once it starts bleeding it finds it has to simply bleed back to it's military law liar core and then try to recapture the corporate world to make the things it wants to use to subdue the population.
I'm amazed that MF Doom is still around even to this day. I was expecting it to go down with Lehman.
And .... ZERO HEDGE bitchezzzzzzzzzzz
I don't know that much about MF, but they sure aren't just a "futures broker."
Edit: Here's the latest earnings press release. They listed $41 billion of assets and $39.7 billion of liabilities as of September 30.
WTF are Haavaad and Columbia doing donating to the 0?
That's right, taxpayers pay for it.
(Puke time.)
I recall around 6 years ago reading MF global had liquidity issues, amazing they could last as long as they did. Going to be a mess to unwind.
Corzine did a great job in Jersey also.
refco part deux
Indeed - and quite a few of the senior london Refco staff went to MF after Refco died.
Also...I'm sure the government wouldn't mind having a "financial services firm" fail.
Dexia = Bear?
MF = Lehman?
I posted this very late on the old MF thread, so I thought I would repost here:
This is my second direct experience with a balance sheet blowup, and I am beginning to wonder if there is not something more to this than mere stupidity.
UBS, prior to 2006, had a pretty nice clean balance sheet. I'm not sure about the exact timeline, but around then, they started a prop group and brought in a prop team. This team basically loaded up on MBS, which anyone in the market new were trading pretty rich, especially since plenty of people had already noticed the cracking in the RE market. Nonetheless, these guys went in huge and filled the balance sheet with this paper. I think it was late 2007, but may have been early 2008, they took a huge loss on the paper, one of the canaries in the upcoming MBS disaster. Severely impaired the bank, and all the jackasses who had been buying this paper left with gigantic golden parachutes, while shareholders (and employees) got stung for size.
Now we have MF, which until Corzine arrived was a simple broker shop with a cash cow business and a sterling balance sheet. As part of his makeover, Corzine adds a prop group, and what do they buy? Sovereign European debt and plenty of it. Sovereign debt implodes, and they are toast. They don't have the equity value to support the paper, and their ability to raise capital is probably zero, so shareholders are destroyed, employees will take a hit, if not altogether be out of a job, and yet again, Corzine (and preumably his prop team) are protected with golden chutes.
Now, perhaps these are cases of mere stupidity by really bad, if somehow very senior, traders and risk managers. But somebody was on the other side of these trades, gleefully unloading this paper on companies, that previously, had beautiful balance sheets. The seller gets out of risk that is preparing to crumble, the buyers (as in the actual traders) are able to walk away with full pockets, and the losses are borne by people with little or no knowledge of the transaction.
Postscript: Two things really strike me about these situations. In both cases, "talent" is brought in from another firm. That talent immediately takes on huge risk at a market top, blows up the firm, then walks away with a galactic severance package. I just can't believe these are cases of simple stupidity. It feels like there is more to these stories, and they stink.
The Marcos era? Come on, you're reaching! You're fictional post is like an old " Arnie Movie "
{ TRUE LIE'S }
Thanks for the tidbit, and I wouldn't put that last bit past a GS leech.
Sounds like Monsanto and the FDA.
Reminds me more of the restaurant scene from Goodfellas
http://www.youtube.com/watch?v=ZPtjyqgZAUk
Bullseye. At GS, Corzine skimmed only a coupla hundred million $$$, then flounced off to Jew Jersey. Now he's getting into the Big Time.
The story is the bonus structure and golden parachutes, there is no reason to look for a conspiracy ... all the way down the chain all the men investing other's people money look for short term yield no matter what's beyond the horizon.
TPTB gladly make use of this greed by front running the crash and investing in physical assets, but all they need is a lack of regulation ... nothing more. Human psychology does the rest ... retail investors and pensioners give their money to men in suits who look reliable because they want interest, the men in suits know that they need short term yields to get bonuses and they know they will have their loot safe and sound when everything crashes. Any money manager who doesn't play along won't have customers for long any way ...
The allure of interest has always caused booms and busts and short term enrichment of the financial class, long before fiat currencies ... unguided capitalism always backfires. Only growth and regulation/redistribution can turn the completely a-moral greed of man towards social advancement ... and we're all out of growth. (This is not a plea for simply more wellfare, wellfare too can degrade as well as improve society ... simple answers are for fools.)
Can't they just get thrown into one of those alphabet bailout programs? Or has the emperor given them the thumbs down?
MF Global downgrades spur sale search, 28 October 2011, (Financial Times) http://www.ft.com/cms/s/0/7b2d34f6-00cb-11e1-930b-00144feabdc0.html
TIP: To read the whole article google FT headline.
Thanks for the link. I Googled it..
MF
nice name
Their trading system SUCKS (it crashes and then no one answers the trading lines)...but then they'll tell you that even though their quotes weren't working (and thus it appears that their system is down), in fact, their system is still working (albeit without quotes), and as the client, you should have mysteriously KNOWN this...and blindly entered futures orders without quotes. This is what their upper level management told me...that's some great fiduciary advice there. They are a grade A bunch of schmucks. Couldn't have happened to a nicer group of guys. I'll be wiring out and closing my account tomorrow.
Margin and leveraged accounts are great on the way up...on the way down they are deadly and wipe you out fast.
Remember Long Term Capital Corp..yes, the one run by Geniuses with Nobel Prizes....a tiny turn of events (the Russian Ruble) cleaned their Billion Dollar clocks within a few days.
This is what happens when the end is close, the bankers are starting to feed and prey on one another in order to stay afloat. There is no one left but the game players and govt. and they won't push their luck openly with govt. because they could do hundreds of years in Federal prison. Serves Jamie Dimon right, it truly does. Don't get me wrong, sooner or later Goldman or Citi are going to take that long walk once BOA goes into the toilet.
inshallah
The bankers are preying on banks, but to say they are preying on eachother is an insult to the people they are really preying on ... when all is said and done when a bank crashes the bankers are still sitting pretty.
Bad senator, bad businessman - is Corzine good at anything?
Governor of N.J.? Oh wait, he's running his hedge fund the way he ran N.J. Into the ground.
"CDS" = Complete Dog Shit
JC Flowers will come to the rescue as they did in 2008 ($300M in funding) when Evan Dooley lost over a $100M in bad wheat bets for MF.
DAX monthly chart at blog shows recent bullish candle revealing aggressive short covering rally enclosed within big picture bearish pattern.
Bullish USD weekly/monthly and bearish SP500/DOW monthly
charts will eventually ensure a violent reversal of equity uptrend.
http://stockmarket618.wordpress.com
Corzine fastidiously applied the principles he learned in government back to private business. Although one might argue that MF Global is not really a business but another form of casino.
At GS one could simply steal a little here and there. It was easy. In Government one is continuously stealing. When you steal from your own business by burning through cash with no discipline, you can't tax your shareholders. He went from stealing a little here and there to the grand larceny of government and now MF is going down the drain.
what a car wreck. was a union thug trooper driving this time too?
You just gotta ask yourself why the captain of the ship would go below decks with an auger
(European sovereign debt).