MF Global bankruptcy leaves employees adrift
Updated: 2011-11-02 07:55
NEW YORK - MF Global Holdings Ltd's bankruptcy filing is throwing into question the futures of some of Wall Street's most experienced bankers.
Jon Corzine, 64, who helped run Goldman Sachs Group Inc from 1994 to 1999, added about 800 employees as he tried to remake the broker into an investment bank. Recruits included Michael Stockman, UBS AG's former chief risk officer for the Americas, Richard Moore, once Citigroup Inc's head of European fixed-income, and Jon Bass, 49, also previously of UBS, where he was a member of the investment bank's board.
MF Global sought bankruptcy protection on Tuesday within a week of Moody's Investors Service cutting the New York-based company's credit rankings, reporting a record quarterly loss and disclosing $6.3 billion of wagers on the sovereign debt of some of Europe's most indebted nations.
The company was one of the few on Wall Street adding employees amid about 120,000 layoffs announced by banks globally this year, according to Bloomberg Industries.
MF Global employed 2,870 people globally, according to a bankruptcy filing. Corzine, the former New Jersey governor who started at Goldman Sachs in 1975 on the bond desk, became MF Global's chairman and chief executive officer in March 2010.
Average daily trading volumes of high-yield debt dropped to $3.6 billion in July, the lowest this year, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, as concern mounted that a European sovereign default would disrupt the banking system.
It became harder for investors to trade bonds as Wall Street dealers cut their holdings of corporate credit to the lowest in more than eight years the week ended Oct 5.
The primary dealers of US government securities that trade directly with the Federal Reserve reduced inventories of corporate debt due in more than a year to $54.6 billion, down 42 percent since May.
Declines in trading and bond issuance hurt smaller companies that entered the market after Lehman Brothers Holdings Inc filed for bankruptcy. As Corzine added staff, FBR Capital Markets Corp cut its leveraged finance banking and trading operation, BTIG pared its high-yield brokerage team in September and Citadel LLC shed distressed debt and loan traders and salespeople in August.
Disclosure of MF Global's wagers on the bonds of countries including Belgium, Italy, Spain and Ireland on Oct 25, fueled credit-rating downgrades from Moody's Investors Service and Fitch Ratings to junk status. That "sparked an increase in margin calls", according to the bankruptcy filing.
MF Global listed debt of $39.7 billion and assets of $41 billion. It aims to complete "a successful, rapid reorganization" of its finances in court, while maintaining a "business-as-usual atmosphere", MF Global President Bradley Abelow said in an affidavit.