================================================================= MF GLOBAL BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) November 3, 2011 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- MF GLOBAL BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Michille P. Deiparine, Neil U. Lim, Psyche A. Castillon and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF MF GLOBAL [00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011 [00003] MF GLOBAL'S CHAPTER 11 DATABASE [00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS [00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE [00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING [00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK [00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D' [00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2' [00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2' [00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS KEY DATE CALENDAR ----------------- 10/31/11 Voluntary Chapter 11 Petition Date 11/01/11 3:00 P.M. First Day Hearing before Judge Glenn 11/30/11 Deadline to Provide Utilities with Adequate Assurance 12/14/11 Deadline to File Schedules of Assets and Liabilities 12/14/11 Deadline to File Statement of Financial Affairs 12/14/11 Deadline to File Lists of Contracts and Leases 01/29/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 02/28/12 Expiration of Debtors' Exclusive Plan Proposal Period 02/28/12 Deadline to Make Decisions About Lease Dispositions 04/28/11 Expiration of Debtors' Exclusive Solicitation Period 10/30/13 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO MF GLOBAL BANKRUPTCY NEWS ----------------------------------------------------------------- MF GLOBAL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Grace & Co., Delphi Corp., Tribune Company, Ambac Financial Group, Inc., National Century Financial Enterprises, Enron Corp., Parmalat Finanziaria, S.p.A., and the Roman Catholic Church in the United States. ================================================================= [ ] YES! Please enter my personal subscription to MF GLOBAL BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) MF GLOBAL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of MF GLOBAL BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF MF GLOBAL ----------------------------------------------------------------- MF Global Holdings Ltd. 717 Fifth Avenue New York, NY 10022 Tel: (212) 589-6200 http://www.mfglobal.com/ MF Global Holdings Ltd. (NYSE: MF) is one of the world's leading brokers of commodities and listed derivatives. MF Global provides access to more than 70 exchanges around the world. The company is also an active broker-dealer in markets for commodities, fixed income securities, equities, and foreign exchange. As of Oct. 30, 2011, MF Global is one of 20 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York. In addition to executing client transactions, MF Global provides research and market commentary to help clients make trading decisions, as well as providing clearing and settlement services. The Company is also active in providing client financing and securities lending services. MF Global's roots go back nearly 230 years to a sugar brokerage on the banks of the Thames River in London. MF Global is headquartered in the United States, and has operations globally, including the United Kingdom, Australia, Singapore, India, Canada, Hong Kong, and Japan. The Company's priority is serving the needs of its diversified global client base, which includes a wide range of institutional asset managers and hedge funds, professional traders, corporations, sovereign entities, and financial institutions. The Company also offers a range of services for individual traders and introducing brokers. MF Global has roughly 2,870 employees worldwide, 13 of which are employed by the Debtors in the United States. MF Global derives revenues from three main sources: (a) commissions generated from execution and clearing services; (b) principal transactions revenue, generated both from client facilitation and proprietary activities; and (c) net interest income from cash balances in client accounts maintained to meet margin requirements, as well as interest related to MF Global's collateralized financing arrangements and principal transactions activities. For fiscal 2011, MF Global generated total revenues of roughly $2.2 billion, revenues net of interest and transaction-based expenses of roughly $1.1 billion, and incurred net loss attributable to MF Holdings, the ultimate parent company, of $81.2 million. Product Offerings MF Global provides execution services for five broad categories of products: commodities, equities, fixed income, foreign exchange, and listed futures and options. Many of the contracts and securities that MF Global trades are listed on exchanges, while others are traded over-the-counter. The Company executes orders for its clients on either an agency or principal basis. A. Commodities MF Global provides clients execution services for transactions relating to derivative contracts, including futures, options, forward sale agreements and other types of instruments based on the price of metals and industrial materials. Metal derivatives are traded on exchanges and in the OTC markets. MF Global is one of 12 designated ring-dealing members of the world's largest metals exchange, the London Metal Exchange. MF Global also executes trades in the energy derivatives market, including futures, options, swaps, and forwards on a range of energy products, including crude oil, natural gas, heating oil, gasoline, propane, electricity and other energy commodities. MF Global is an active market participant in both exchange-listed and OTC-traded energy derivatives, and has been consistently ranked as one of the leading providers by volume of clearing and execution services on both the New York Mercantile Exchange and ICE Futures Europe. MF Global also delivers its clients targeted hedging and risk management solutions and helps clients locate trading opportunities in a broad array of agricultural commodities markets. MF Global provides trade execution services for a wide range of OTC and listed agricultural commodities markets, including the grain and oilseed futures and options markets and for soft commodities, such as coffee, cocoa, and sugar, on exchanges in North America, Europe and Asia Pacific. B. Equities MF Global provides execution services in both cash equities and equity derivative products around the globe. Equity derivative products include futures, ETFs, options (single stock, index and ETF), contracts for difference (where legally available), and other securities whose underlying value is related to the price of one or more stocks, a basket of stocks, or stock indices. Recently, MF Global expanded its global cash equity, equity derivatives, portfolio trading, and electronic trading services teams to provide improved service for its clients in a variety of major markets around the world. C. Fixed Income MF Global provides execution services for a variety of fixed income products. These include U.S. Treasury and agency securities and bonds issued by European governments and by multinational institutions. The Company also trades corporate bonds, mortgage-backed and asset-backed securities, emerging market securities, as well as credit default swaps and interest rate swaps. MF Global has been designated as a primary leader of U.S. treasury securities, enabling it to serve as a counterparty to the Federal Reserve Bank of New York in open-market operations, and participate directly in U.S. Treasury auctions. MF Global also provides analysis and market intelligence to the Federal Reserve's trading desks and to its clients. D. Foreign Exchange MF Global delivers access to a range of products and trading opportunities in the foreign exchange markets worldwide. Many of these foreign exchange transactions are undertaken by MF Global's clients in connection with the purchase or sale of other instruments. Most foreign exchanges are conducted on an OTC basis. E. Futures and Options MF Global provides execution services for listed futures and options, including interest rate, government bond, and index futures and options. MF Global's floor brokers offer clients access to traditional floor execution for futures and options that continue to have price discovery on trading floors. Where futures and options have moved to electronic trading platforms, MF Global provides extensive electronic connectivity to global markets. Service Offerings In addition to executing client transactions, MF Global provides clearing services, which are a critical component of the futures and options business, as well as a range of services designed to assist clients in developing trading ideas and managing their trading portfolios. A. Clearing and Financing MF Global provides a number of prime services, including clearing and settlement of trades, client financing, securities lending, and a range of administrative services. The revenue MF Global earns from prime services activities consists of commissions, interest income on client custodial accounts, principal transactions and fees. In addition to the clearing transactions the Company executes for its own clients, the Company also clears transactions for clients that are using other executing brokers or executing their orders directly on an exchange. Moreover, MF Global has developed a substantial business in clearing transactions on behalf of other brokers. B. Research and Market Commentary MF Global offers a broad array of market research, analysis, and commentaries that provide clients with actionable insights they can use to inform their trading strategies and investment decisions. MF Global's proprietary offerings include research on a wide range of instruments, markets and industries, equity research on many of the world's largest companies and industry sectors, policy-focused research on U.S. legislative and regulatory topics, and analysis of macroeconomic trends and issues driving financial markets. Regulation and Exchange Memberships MF Global's business activities are extensively regulated by a number of U.S. and foreign regulatory agencies and exchanges. These regulatory bodies and exchanges are charged with protecting investors by imposing requirements relating typically to capital adequacy, licensing of personnel, conduct of business, protection of client assets, record-keeping, trade-reporting and other matters. They have broad powers to monitor compliance and punish non-compliance. If MF Global fails to comply with applicable regulations, it may be subject to censure, fines, cease-and-desist orders, suspension of its business, removal of personnel, civil and criminal litigation, revocation of operating licenses or other sanctions. In the United States, MF Global is principally regulated in the futures markets by the Commodity Futures Trading Commission, the Chicago Mercantile Exchange, and the National Futures Association and in the securities markets by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Chicago Board Options Exchange. Among other things, the CFTC, SEC, FSA and other U.S. and non-U.S. regulators require MF Global to maintain specific minimum levels of regulatory capital in MF Global's operating subsidiaries that conduct its futures and securities business. Further, as participants in the financial services industry, MF Global's business must comply with the anti- money laundering laws of the jurisdictions in which MF Global does business, including, in the U.S., the USA PATRIOT Act, which requires the Company to know certain information about its clients and to monitor their transactions for suspicious activities, as well as the laws of the various states in which the Company does business or where the accounts with which the Company does business reside. MF Global's business is also subject to rules promulgated by the U.S. Office of Foreign Assets Control, which requires that MF Global refrain from doing business, or allow its clients to do business through it, in certain countries or with certain organizations or individuals on a prohibited list maintained by the U.S. government. PREPETITION INDEBTEDNESS As of Sept. 30, MF Global and its subsidiaries had $41,046,594,000 in total assets and $39,683,915,000 in total liabilities. A. Liquidity Facility Agreement The Company owed JPMorgan Chase Bank, N.A., as administrative agent, and several lenders pursuant to a five-year revolving credit facility dated as of June 15, 2007, the aggregate principal amount of roughly $1.2 billion, $1.172 billion of which was drawn as of the Oct. 31, 2011. The Liquidity Facility permits the Company, in addition to certain of its subsidiaries, to borrow funds under the Liquidity Facility until June 15, 2014. Roughly $689.6 million is available for borrowing until the Maturity Date, and roughly $511.3 million is available for borrowing until June 15, 2012. The Liquidity Facility includes a covenant requiring the Company to maintain a minimum Consolidated Tangible Net Worth of not less than the sum of (a) 75% of the pro forma Consolidated Tangible Net Worth as of March 31, 2010, after giving effect to the offering by the Company of equity interests on June 2, 2010, including exercise of the underwriters' option to purchase additional shares, and the consummation in whole or in part of the offer to exchange of the Company dated June 1, 2010, plus (b) 50% of the net cash proceeds of any offering by the Company of equity interests consummated after the second amendment effective date plus (c) 25% of cumulative net income for each completed fiscal year of the Company after the second amendment effective date for which consolidated net income is positive. The Liquidity Facility also requires the Company to limit its consolidated capitalization ratio to be no greater than 37.5% on or after March 31, 2011, and before March 31, 2012; and 35% on or after March 31, 2012. B. Secured Facility to MF Global Inc. On June 29, 2011, the Company's U.S. regulated broker-dealer subsidiary, MF Global Inc., entered into a $300 million 364-day secured revolving credit facility with a syndicate of lenders of which MFGI has borrowed roughly $210 million as of Oct. 31, 2011. JPMorgan Chase Bank, N.A., who serves as the Liquidity Facility Agent, is also the Administrative Agent and a lender under the MFGI Secured Facility. The other lenders are: * Harris, N.A., * Bank of America, N.A., * Citibank, N.A., * Goldman Sachs Bank USA, * Deutsche AG New York Branch, * The Bank of New York Mellon, * Commonwealth Bank of Australia, * Standard Chartered Bank, and * U.S. Bank National Association. JPMorgan Securities LLC, BMO Capital Markets, Citigroup Global Markets Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, serve as Joint Lead Arrangers and Joint Bookrunners under the facility. The MFGI Secured Facility is secured by eligible collateral owned by MFGI. MF Holdings and MF Finance have provided unsecured guarantees under the facility. The MFGI Secured Facility includes a covenant requiring MFGI's consolidated tangible net worth at any time not to be less than $227.3 million. C. Unsecured Convertible Notes MF Global Holdings Ltd.'s outstanding notes are: Outstanding Title Principal Amount ----- ---------------- 1.875% Notes due February 1, 2016 $287,500,000 6.250% Notes due August 8, 2016 $325,000,000 3.375% Notes due August 1, 2018 $325,000,000 9% Notes due June 20, 2038 $78,617,000 The 1.875% Convertible Notes are payable semi-annually in arrears on February 15 and August 1 of each year, since August 1, 2011. Holders may convert the 1.875% Convertible Notes at their option prior to August 1, 2015 upon the occurrence of certain events relating to the price of its common stock or various corporate events. The 9% Convertible Notes are payable semi-annually in arrears on June 15 and December 15 of each year. Holders may convert the 9% Convertible Notes at their option at any time prior to the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, common stock or a combination thereof at the Company's election. The initial conversion rate for the 9% Convertible Notes is 95.6938 shares of Common Stock per $1 principal amount of 9% Convertible Notes, equivalent to an initial conversion price of approximately $10.45 per share of common stock. The conversion rate will be subject to adjustment in certain events. In July 2011, the Company raised $325 million in aggregate principal amount of 3.375% Convertible Senior Notes due 2018. In August 2011, the Company also launched and priced its first senior unsecured debt offering, issuing $325,000,000 in five-year 6.25% senior notes. The Company used a portion of the net proceeds of these offerings to repurchase a portion of its existing 9% Convertible Notes, repaid a portion of its outstanding permanent indebtedness under its Liquidity Facility and used the remainder for general corporate purposes. As of June 30, 2011, there were 1,500,000 shares of Series A Preferred Stock in MF Holdings issued and outstanding to J.C. Flowers. Also as of June 30, 2011, 403,550 shares of Series B Preferred Stock remain outstanding. EVENTS LEADING TO CHAPTER 11 FILING As a global financial services firm, MF Global is materially affected by conditions in the global financial markets and worldwide economic conditions, Bradley I. Abelow, president and chief operating officer of MF Global Holdings Ltd., related. On September 1, 2011, MF Holdings said the FINRA informed it that its regulated U.S. operating subsidiary, MFGI, was required to modify its capital treatment of certain repurchase transactions to maturity collateralized with European sovereign debt and thus increase its required net capital pursuant to Rule 15c3-1 of the U.S. Securities and Exchange Act. MFGI increased its required net capital to comply with FINRA's requirement. On October 24, 2011, Moody's Investor Service downgraded its ratings on the Company to one notch above junk status based on its belief that MF Holdings would announce lower than expected earnings. On October 25, 2011, MF Holdings announced its results for its second fiscal quarter ended September 30, 2011. The Company revealed that it posted a $191.6 million net loss in the second quarter, compared with a loss of $94.3 million for the same period last year. The net loss reflected a decrease in revenue primarily due to the contraction of proprietary principal activities. Bloomberg News noted that MF Global has lost money in nine of the previous 11 quarters. Dissatisfied with the September announcement by MF Holdings of MFGI's position in European sovereign debt, FINRA demanded that MF Holdings announce that MFGI held a long position of $6.3 billion in a short-duration European sovereign portfolio financed to maturity, including Belgium, Italy, Spain, Portugal and Ireland, Mr. Abelow related. MF Holdings made the announcement on October 25. These countries, according to Mr. Abelow, have some of the most troubled economies that use the euro. Concerns over euro- zone sovereign debt have caused global market fluctuations in the past months and, in particular, in the past week. These concerns ultimately led last week to downgrades by various ratings agencies of MF Global's ratings to "junk" status. This sparked an increase in margin calls against MFGI, threatening overall liquidity, Mr. Abelow said. Concerned about the events of the past week, some of MFGI's principal regulators -- the Commodities Futures Trading Commission and the SEC -- expressed their grave concerns about MFGI's viability and whether it should continue operations in the ordinary course, Mr. Abelow related. While the Company explored a number of strategic alternatives with respect to MFGI, no viable alternative was available in the limited time leading up to the regulators' deadline. CHAPTER 11 FILING MF Global Holdings Inc. and MF Global Finance USA Inc. filed voluntary Chapter 11 petitions mid-morning on Oct. 31 in the U.S. Bankruptcy Court for the Southern District of New York after a planned sale to Interactive Brokers Group was called off. The Wall Street Journal's Mike Spector reported that people familiar with the matter said MF Global had a tentative deal to sell assets to Interactive Brokers as of late Sunday, but the agreement fell apart as talks continued overnight. Discussions ended around 5 a.m. Monday, one of these people said, according to the Journal. According to WSJ's Aaron Lucchetti, Justin Baer and Mike Spector, under the deal: -- MF Global would file for bankruptcy as soon as Monday; -- None of its regulated entities would file; -- Interactive Brokers would then likely make an initial bid of about $1 billion during a court-supervised auction, though the source described the deal as complicated and that number could change; and -- The sale would need to be approved by a bankruptcy judge. Hours before the bankruptcy filing, the Federal Reserve Bank of New York said it has informed MF Global that it has been suspended from conducting new business with the New York Fed. "This suspension will continue until MF Global establishes, to the satisfaction of the New York Fed, that MF Global is fully capable of discharging the responsibilities set out in the New York Fed's policy, 'Administration of Relationships with Primary Dealers,' or until the New York Fed decides to terminate MF Global's status as a primary dealer," according to the Fed's statement. WSJ's Doug Cameron and Joan E. Solsman report that MF Global is one of 22 primary dealers at the NY Fed. They also report that Hong Kong's stock exchange said Monday that MF Global's local unit has been "meeting its financial obligations." NY Times' Michael J. de la Merced and Ben Protess report that one option is for MF Global to follow a precedent set by Lehman Brothers in 2008 by seeking bankruptcy protection for the parent company while selling some assets to Interactive Brokers. Bloomberg News says MF Global is getting advice from Evercore Partners Inc. as it seeks buyers. NY Times recalls that MF Global and Interactive Brokers share a deal history of sorts. In 2005, both competed for assets of Refco, which had filed for bankruptcy. MF Global emerged the victor with a $323 million bid. EU Crisis WSJ and NY Times recounted MF Global's fall after making wrong bets on sovereign bonds issued by European countries. Both reports noted that Jon S. Corzine -- former New Jersey governor and one-time chairman of Goldman Sachs Group Inc. -- took over as CEO at MF Global in March 2010. He set out to change MF Global from a midsize derivatives broker to full-fledged investment bank that took risks with its own capital. The trades, which ballooned over $6 billion, helped knock MF Global's own debt ratings to junk and drained investors' confidence in the firm. WSJ further noted the crisis began with fiscal troubles in Greece, which just received approval from European leaders for a second bailout. Investors fret that a number of other countries won't be able to pay all their obligations, which has hurt the values of sovereign bonds that Mr. Corzine purchased. NY Times said MF Global held about $6.3 billion in bonds issued by Italy, Spain, Belgium, Ireland and Portugal. By contrast, Morgan Stanley disclosed in October that it had just a $2.1 billion exposure to Europe. WSJ noted Morgan Stanley had roughly $4 billion in net exposure to debt issued by Italy and Spain and nearly 50 times as much cash and liquidity as MF Global. Other Potential Buyers Bloomberg News' Matthew Leising reported that Mr. Corzine reached out to his former firm, Goldman Sachs, about selling all or part of the company, according to two people with knowledge of the firm's deliberations. Goldman Sachs may be interested in acquiring futures positions or other financial assets at the right price, said the people, who asked not to be named because the discussions were private. Bloomberg also said Macquarie Group Ltd. has examined MF Global's books, though Australia's largest investment bank wasn't working toward getting a deal done over the weekend, according to a person with knowledge of the situation. Another person told Bloomberg that Barclays Plc is among banks that have looked at MF Global. State Street Corp. is also reported to be a potential bidder, Bloomberg said. Bonds Fall Bloomberg News' Matthew Leising and Zachary R. Mider reported Saturday morning that MF Global bonds declined to as low as 35 cents on the dollar Friday after the futures broker drew on its credit lines and Moody's Investors Service and Fitch Ratings cut the firm's ratings to junk. Bloomberg said the company's $325 million of 6.25% bonds, issued at par in August, fell 11.9 cents to 50 cents on the dollar as of 5:17 p.m. in New York Friday, for a yield of 25.2%, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Bloomberg noted that MF Global has declined 67% last week and its bonds started trading at distressed levels as the firm seeks a buyer for its futures brokerage to raise capital. Moody's slashed MF Global on Oct. 24 one level to Baa3 citing the company's struggles to earn a profit, increased risk appetite and low interest rates. On Friday, Moody's reduced MF Global two more steps to Ba2 and put it under review for more possible cuts. Fitch reduced the grade to BB+, the highest junk rating, from BBB, citing increased trading with its own capital and the challenges of earning profits from interest in the current "low interest rate environment." Bloomberg noted that MF Global said the next day it had a net loss of $191.6 million for the quarter. It has lost money in nine of the previous 11 quarters. ----------------------------------------------------------------- [00002] COMPANY'S BALANCE SHEET AS OF SEPT. 30, 2011 ----------------------------------------------------------------- MF GLOBAL HOLDINGS LTD. CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) As of Sept. 30, 2011 ASSETS Cash and cash equivalents $603,849 Restricted cash and segregated securities 9,940,799 Securities purchased under agreements to resell 9,524,214 Securities borrowed 2,638,113 Securities received as collateral 48,979 Securities owned 14,008,167 Receivables: Brokers, dealers and clearing organizations 3,211,270 Customers 526,444 Other 132,848 Memberships in exchanges, at cost 4,533 Furniture, equipment and leasehold improvements 161,104 Intangible assets, net 32,297 Other assets 213,977 ------------ TOTAL ASSETS $41,046,594 ============ LIABILITIES AND EQUITY Short-term borrowing $731,482 Securities sold under agreements to repurchase 17,109,858 Securities loaned 1,670,615 Obligation to return securities received as collateral 48,979 Securities sold, not yet purchased 3,698,393 Payables: Brokers, dealers and clearing organizations 2,547,829 Customers 12,707,997 Accrued expenses and other liabilities 272,561 Long-term borrowings 896,201 ------------ TOTAL LIABILITIES $39,683,915 ============ Commitments and contingences Preferred stock 1,500,000 Series A Convertible 96,167 403,550 Series B Convertible 34,446 ------------ EQUITY Common stock 165,568 Additional paid-in capital 1,632,820 Accumulated other comprehensive income (1,220) Accumulated deficit (582,896) Non-controlling interest 17,794 ------------ TOTAL EQUITY 1,232,066 ------------ TOTAL LIABILITIES AND EQUITY $41,046,594 ============ MF GLOBAL HOLDINGS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands) For the three months ended Sept. 30, 2011 Revenues Commissions $366,324 Principal transactions 12,023 Interest income 113,189 Other 8,182 ------------ Total Revenues 499,718 Interest and transaction-based expenses: Interest expense 34,006 Execution and clearing fees 186,945 Sales commissions 72,843 ------------ Total interest and transaction-based expenses 293,794 Revenues, net of interest and transaction- based expenses 205,924 ------------ Expenses Employee compensation and benefits 133,549 Employee compensation related to non- recurring IPO awards - Communications and technology 38,585 Occupancy and equipment costs 16,808 Depreciation and amortization 12,802 Professional fees 20,798 General and other 29,902 Restructuring charges 10,037 Impairment of goodwill 4,912 ------------ Total other expenses 267,393 (Loss)/gain on exchange seats and shares (388) Loss on extinguishment of debt 16,051 Interest on borrowings 17,957 ------------ Income before provision for income taxes (95,865) Provision for income taxes 91,559 Equity in income of unconsolidated cos. 1,252 ------------ Net loss (186,172) Less: Net income attributable to Non-controlling interest 394 ------------ Net loss attributable to MF Global Holdings (186,566) ------------ Dividends declared on preferred stock 5,006 Cumulative and participating dividends - ------------ Net loss applicable to common shareholders ($191,572) ============ ----------------------------------------------------------------- [00003] MF GLOBAL'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: MF Global Holdings Ltd. 717 Fifth Avenue New York, NY 10022 Bankruptcy Case No.: 11-15059 Debtor-affiliate filing separate Chapter 11 petition: Entity Case No. ------ -------- MF Global Finance USA Inc. fka Man Group Finance, Inc. 11-15058 Chapter 11 Petition Date: Oct. 31, 2011 Bankruptcy Court: United States Bankruptcy Court Southern District of New York Bankruptcy Judge: Honorable Martin Glenn Debtor's Counsel: J. Gregory Milmoe, Esq. Kenneth S. Ziman, Esq. J. Eric Ivester, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, NY 10036 Tel: (212) 735-3000 E-mail: gregory.milmoe@skadden.com ken.ziman@skadden.com eric.ivester@skadden.com Claims & Noticing Agent: The Garden City Group, Inc. Total Assets: $41,046,594,000 as of Sept. 30, 2011 Total Liabilities: $39,683,915,000 as of Sept. 30, 2011 A person familiar with the matter told The Wall Street Journal that Weil, Gotshal & Manges restructuring lawyers were preparing to represent MF Global's London affiliate. The American Lawyer reported that British firm Ashurst is also advising on the U.K. administration of MF Global UK and MF Global YK Services, according to U.K. publication Legal Week. Another source told WSJ that restructuring lawyers at Sullivan & Cromwell are advising MF Global. The American Lawyer also related that the U.K.'s Financial Services Authority has appointed KPMG to manage a special administration regime for MF Global. MF Global's many creditors, according to The American Lawyer, have also begun to line up outside law firms, including Simpson Thacher & Bartlett and Kirkland & Ellis. Simpson Thacher represents JPMorgan Chase Bank, N.A., administrative agent for the Debtors' lenders. The petition was signed by Bradley I. Abelow, Executive Vice President and Chief Executive Officer of MF Global Finance USA Inc. ----------------------------------------------------------------- [00004] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Amount ------ --------------- ------ JPMorgan Chase Bank, N.A., Bond Debt $1,200,875,000 as Indenture Trustee 270 Park Ave New York, NY 10017 Deutsche Bank Trust Company Bond Debt $325,000,000 Americas, as Indenture Trustee for 6.250% Notes due Aug. 8, 2016 Attention: Lynne Malina Legal Department 60 Wall Street, 37th Floor New York, NY 10005 Fax: (212) 250-0677 Deutsche Bank Trust Company Bond Debt $325,000,000 Americas, as Indenture Trustee for 3.375% Notes due Aug. 1, 2018 Corporate Trust Office at Attention: Lynne Malina Legal Department 60 Wall Street, 37th Floor New York, NY 10005 Fax: (212) 250-0677 Deutsche Bank Trust Company Bond Debt $287,500,000 Americas, as Indenture Trustee for 1.875% Notes due Feb. 1, 2016 Attention: Lynne Malina Legal Department 60 Wall Street, 37th Floor New York, NY 10005 Fax: (212) 250-0677 Deutsche Bank Trust Company Bond Debt $78,617,000 Americas, as Indenture Trustee for 9% Notes due June 20, 2038 Attention: Lynne Malina Legal Department 60 Wall Street, 37th Floor New York, NY 10005 Fax: (212) 250-0677 Headstrong Services, LLC Unknown $3,936,074 4035 Ridge Top Rd Ste 300 Fairfax, VA 22030 Tel: (703) 272-6700 Fax: (703) 272-2000 CNBC Unknown $845,397 c/o NBC Universal CFS Bank of America NBC Universal Lock Box #402971 Atlanta, GA 30384-2971 10 Fleet Pl London, EC4M7QS GB Phone: 0207 653 9300 Sullivan & Cromwell LLP Unknown $596,939 125 Broad St New York, NY 10004-2498 Tel: (212) 558-4000 Fax: (212) 558-3588 Caplin Systems Limited Unknown $427,520 Cutlers Court, 115 Houndsditch London EC3A 7BR GB Wachtell, Lipton, Unknown $388,000 Rosen & Katz 51 W 52nd St New York, NY 10019 Tel: (212) 403-1000 Fax: (212) 403-2000 Linklaters LLP Unknown $348,000 1345 Avenue of the Americas New York, NY 10105 Tel: (212) 903-9000 Fax: (212) 903-9100 PricewaterhouseCoopers LLP Unknown $312,598 1177 Avenue of the Americas New York, NY 10036 Tel: (212) 596-8000 Fax: (813) 286-6000 Dean Media Group Unknown $309,000 560 W Washington Blvd Ste 420 Chicago, IL 60605 Oracle Corporation Unknown $302,704 500 Oracle Pkwy Redwood Shores, CA 94065 Tel: (916) 315-4305 Fax: (650) 506-7200 ForwardThink Group Inc. Unknown $278,825 112 Candido Ct. Manalapan, NJ 07726 Tel: (646) 873-6530 Bloomberg Finance LP Unknown $276,064 731 Lexington Ave. New York, NY 10022 Fax: (917) 369-5000 The Gate Worldwide Unknown $229,739 (S) Pte Ltd 11 E 26th St Fl 14 New York, NY 10010-1422 Fax: (212) 508-3543 52 Craig Rd Singapore 89690 Lever Interactive Unknown $178,900 1431 Opus Pl Ste 625 Downers Grove, IL 60515 Braxton Group LLC Unknown $172,325 7 Bridge View Dr New Fairfield, CT 06812 Tel: (203) 312-9200 Forum Group Unknown $154,300 260 Madison Ave # 200 New York, NY 10016-2401 Tel: (212) 687-4050 Fax: (917) 256-0314 Shearman & Sterling Unknown $135,500 599 Lexington Ave New York, NY 10022 Tel: (212) 848-4000 Fax: (212) 848-7179 RR Donnelly Unknown $118,600 111 South Wacker Dr Chicago, IL 60606 Tel: (312) 326-8000 Fax: (212) 503-1344 Infinia Group LLC Unknown $115,001 515 West 20th St Fl 3 New York, NY 10011 Tel: (212) 463-5100 Directors Fees Unknown $105,000 717 Fifth Ave New York, NY 10022 ADK America Inc. Unknown $101,958 515 West 20th St Fl 6 East New York, NY 10011 3137 S La Cienega Blvd Los Angeles, CA 90016 Alvarez & Marsal Tax Unknown $65,000 Advisory Services LLC 600 Lexington Ave Fl 6 New York, 10022 10017 Tel: (212) 759-4433 Fax: (212) 328-8757 The Global Capital Unknown $63,250 Group, Ltd 88 W Schiller Ste 3008 Chicago, IL 60610 Tel: (312) 451-2676 Access Search Inc. Unknown $61,440 218 N Jefferson Ste 302 Chicago, IL 60661 Tel: (312) 930-1034 Fax: (312) 930-1070 Holland & Knight Unknown $59,000 Attn Bill Honan, Executive Partner 31 W 52nd St New York, NY 10019 Tel: (212) 513-3200 Fax: (212) 385-9010 JVKellyGroup Inc. Unknown $56,760 145 E Main St Huntington, NY 11743 Tel: (631) 427-2888 Fax: (631) 427-0266 Willis of New York, Inc. Unknown $49,850 200 Liberty St Fl 7 New York, NY 100281-0001 Tel: (212) 344-8888 Fax: (212) 915-8511 Fleishman Hillard Inc. Unknown $42,000 4706 Paysphere Cir Chicago, IL 60674 Tel: (314) 982-1700 Fax: (314) 231-2313 American Express Company Unknown $40,000 Corporate Services Operations AESC-P 20022 N 31st Ave Mail Code AZ-08-03-11 Phoenix, AZ 85027 Tel: (800) 528-2122 Other Regrsn Unknown $37,280 111 South Wacker Dr Chicago, IL 60606 Tel: (312) 326-8000 Technology Management Unknown $34,000 Consulting Group DBA Roadmap Learning 235 Iris Rd Lakewood, NJ 08701 Eloqua Corporation Unknown $33,000 1921 Gallows Rd Ste 250 Vienna, VA 22182-3900 Fax: (302) 655-5049 GKH Law Offices Unknown $30,074 One Azrieli Center, Round Bldg Tel Aviv 67021 Israel Phone: 972-3-607-4444 Fax: 972-3-607-4422 1 Shmuel Ha'Nagid Street, 4th Fl Jerusalem 94592 Israel Phone: 972-2-623-2683 Fax. 972-2-623-6082 The Siegfried Group LLP Unknown $30,000 1201 Market St Ste 700 Wilmington, DE 19801-1147 Synechron (Synechron Inc.) Unknown $29,740 15 Corporate Pl S Ste 400 Piscataway, NJ 08854 Tel: (732) 562-0088 Fax: (732) 562-1414 Amideo and Associates Unknown $27,300 787 S Shore Drive Miami Beach, FL 33141 Tel: (305) 519-5377 BTA Unknown $26,978 Promontory Financial Unknown $25,000 Group LLC 1201 Pennsylvania Ave NW Ste 617 Washington, DC 20004-2401 Tel: (202) 662-6980 Fax: (202) 783-2924 Media Two Unknown $25,000 319 W Martin St Ste 200 Raleigh, NC 27601 Tel: (919) 553-1246 Ticker Consulting LLC Unknown $22,800 3 Cypress Dr Cedar Knolls, NJ 07927 Adscom Solutions LLC Unknown $19,440 Attn: Andre Pires 201 East 12 St New York, NY 10003 Premiere Global Unknown $18,227 Services Inc. The Terminus Building 3280 Peachtree Rd NE Ste 1000 Atlanta, GA 30305 Tel: (866) 548-3203 Fax: (404) 262-8540 Paul Hastings Unknown $11,646 Attn Barry Brooks 75 East 55th Street New York, NY 10022 Tel: (212) 318-6000 Fax: (212) 319-4090 Fox Rothschild, LLP Unknown $11,645 Attn: Accounts Payable - 01 2000 Market St Fl 20 Philadelphia, PA 19103-3222 Tel: (215) 299-2000 Fax: (215) 299-2150 KPMG LLP Unknown $10,000 Dept. 0511 POB 120001 Dallas, TX 75312-0511 Fax: (212) 758-9819 Stephanie G. Schrock Unknown $10,000 7716 N Paulina St Unit 1N Chicago-Rogers Park, IL 60626 ----------------------------------------------------------------- [00005] LIST OF HOLDERS OF MORE THAN 5% OF DEBTORS' COMMON STOCK ----------------------------------------------------------------- The Debtors disclose that these entities beneficially own in excess of 5% of any class of voting stock in MF Global Holdings Ltd. as of Sept. 30, 2011: Amount and Nature of Percentage Name and Address of Beneficial of Common Beneficial Owner Ownership Stock ------------------- ---------- ---------- FMR LLC 13,917,938 8.44% c/o Pyramis Global Advisors, LLC 900 Salem Street Smithfield, RI, 02917 Guardian Life Insurance 12,879,811 7.81% Company c/o RS Investments 388 Market Street Suite 1700 San Francisco, CA 94111 Fine Capital Partners, L.P. 21,504,101 7.37% 590 Madison Avenue, 5th Floor New York, NY 10022 Cadian Capital 10,180,286 6.17% Management, LLC 461 Fifth Avenue 24th Floor New York, NY 10017 TIAA-CREF 9,520,582 5.77% 730 Third Avenue New York, NY 10017 Piper Jaffray Companies 9,132,597 5.54% c/o Advisory Research, Inc. 180 N. Stetson Chicago, IL 60601 Dimensional Fund Advisors, LP 8,920,497 5.41% Palisades West Building One 6300 Bee Cave Road Austin, TX 78746 Rydex Security Global 8,456,992 5.13% Investors, LLC 40 East 52nd Street 16th Floor New York, NY 10022 ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- MF Global Holdings Ltd. and MF Global Finance USA Inc., sought and obtained an order from Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York providing for the joint administration of their separate Chapter 11 cases for procedural purposes. MF Global Holdings Ltd. is the indirect owner of MF Global Finance USA Inc. The Debtors assert that they are "affiliates" as the term is defined in Section 101(2) of the Bankruptcy Code and as used in Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. Accordingly, joint administration of the Debtors' cases is appropriate under Rule 1015(b), the Debtors maintain. The Debtors further assert that joint administration of their Chapter 11 cases will save time and money and avoid duplicative and potentially confusing filings by permitting counsel for all parties-in-interest to (a) use a single caption on the numerous documents that will be served and filed in the cases and (b) file the papers in one case rather than in multiple cases. In addition, the Debtors aver that joint administration will protect parties-in-interest by ensuring that parties in each of the Debtors' Chapter 11 cases will be apprised of the various matters before the Court in these cases. The Debtors assured the Court that rights of the creditors of each of the Debtors will not be adversely affected by joint administration of the cases inasmuch as the relief sought is purely procedural and is in no way intended to affect substantive rights. Each creditor and other party-in-interest will maintain whatever rights it has against the particular estate in which it allegedly has a claim or right, the Debtors maintain. ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO EXTEND SCHEDULES FILING DEADLINE ----------------------------------------------------------------- The Debtors sought and obtained an order from the U.S. Bankruptcy Court for the Southern District of New York extending the deadline to file schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs to Dec. 14, 2011. Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure, the Debtors are required, within 14 days of the Petition Date, to file with the Court (a) schedules of assets and liabilities, (b) schedules of current income and expenditures, (c) statements of financial affairs, (d) statements of executory contracts and unexpired leases, and (e) a list of equity security holders. However, Rule 1007(c) of the Federal Rules of Bankruptcy Procedure provides that an extension of the time for the filing of the Schedules and Statements may be granted "on motion for cause shown." Kenneth S. Ziman, Esq., at Skadden Arps Slate Meagher & Flom LLP, in New York, explains that given the size and complexity of their businesses, the Debtors have a significant amount of information to prepare in order to file their Schedules and Statements. He says that to prepare the required Schedules and Statements, the Debtors must compile information from books, records and documents relating to a multitude of transactions at numerous locations. "Given the limited time available to prepare for the filing of these cases, the substantial burden placed on management by commencement of these cases, the competing demands on employees, the time and attention the Debtors must devote to the restructuring process, and the fact that certain prepetition invoices have not yet been received or entered into the Debtors' financial systems, the Debtors have not had the opportunity to gather the necessary information to prepare and file their respective Schedules and Statements," Mr. Ziman tells the Court. The Debtors believe that the 14-day automatic extension of time to file the Schedules and Statements provided by Rule 1007(c) will not be sufficient to permit completion of the Schedules and Statements. Accordingly, the Debtors assert that due to the complexity of their operations, and the substantial burdens already imposed on the Debtors' management by the commencement of the Chapter 11 cases on an emergency basis, "cause" exists to extend the current deadline for filing the Schedules and Statements. ----------------------------------------------------------------- [00008] DIST. COURT APPROVES MFGI'S SIPA LIQUIDATION PROCEEDING ----------------------------------------------------------------- Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York approved on Oct. 31 the liquidation of MF Global Inc., which liquidation was initiated by the Securities Investor Protection Corporation, which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms. The District Court appointed James W. Giddens as trustee for the liquidation, and further appointed the law firm of Hughes Hubbard & Reed as counsel to Mr. Giddens. Mr. Giddens and his law firm also serve as trustee of the liquidation proceedings of Lehman Brothers Inc. under the SIPA. Mr. Giddens may be reached at: James W. Giddens, Esq. HUGHES HUBBARD & REED LLP One Battery Park Plaza New York, NY 10004-1482 Tel: (212) 837-6060 Fax: (212) 422-4726 E-mail: giddens@hugheshubbard.com SIPC on Monday filed an application with the United States District Court for the Southern District of New York for a declaration that the customers of MF Global Inc. are in need of the protections available under the SIPA. Orlan Johnson, board chairman of the Securities Investor Protection Corporation, said: "When the customers of a failed SIPC member brokerage firm have left their securities in the custody of that firm, SIPC acts as quickly as possible to protect those customers. In this case, SIPC initiated the liquidation proceeding within hours of being notified by the SEC that a SIPC case was necessary to protect the investing public." The trustee is charged with giving notice of the proceeding and mailing claim forms to the customers and other creditors of the firm. Information about the case also will be made available on the Web at http://www.sipc.org/ More information about the MF Global liquidation can also be found at http://www.mfglobaltrustee.com/ The trustee e-mail address for inquiries is MFGITrustee@hugheshubbard.com They have all set up a call center for questions. The number in the U.S. callers is 1- 888-236-0808 and for non-U.S. callers is 1-503-597-5173. ABOUT SIPC The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities -- such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities custodied with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $1.6 billion in order to make possible the recovery of $109.3 billion in assets for an estimated 739,000 investors. MEDIA CONTACT: Ailis Aaron Wolf (703) 276-3265 aawolf@hastingsgroup.com All investor inquiries of SIPC should be directed to asksipc@sipc.org or (202) 371-8300. * * * Linda Sandler of Bloomberg News reported that Kevin Bell, senior associate general counsel of SIPC, said MF Global Inc. customers have been calling the agency's Washington offices asking for their money. "What customers ask is, 'When am I getting my money?'," said Mr. Bell. "You tell them to sit tight, and start gathering their information so they can file claims. Canceled checks, trade confirmations, account statements." Mr. Giddens also served as trustee overseeing the Lehman Brothers Inc. brokerage firm's liquidation. In the Lehman case, it took about 30 days to get claim forms out "because of the complexity," Mr. Bell said, according to Bloomberg. Claim forms were mailed about 17 days after con man Bernard Madoff's firm went into liquidation in 2008, Mr. Bell related. The Lehman Brothers Holdings Inc. unit has been in liquidation since 2008 after its parent filed for bankruptcy with $639 billion in assets. "This is like a mini-Lehman," Mr. Bell told Bloomberg. "We have to get control of the books and records. We have to get the names off the books and records." When broker-dealers are liquidated, customer accounts often go to other firms, sometimes in "bulk transfers," Mr. Bell added. Barclays Plc (BARC) took over accounts from Lehman's brokerage, giving 72,000 brokerage customers access to $40 billion in frozen assets. The New York-based parent company broke rules about keeping clients' collateral separate from its own accounts, futures exchange CME Group Inc. said, according to Bloomberg. Mr. Giddens, according to Bloomberg, said he is "taking steps" to protect customers and set up an "orderly and fair" process to satisfy their claims. He and his team plan to be on the company's premises to provide oversight, he said in a statement, Bloomberg noted. SIPC had lawyers in New York and has "flown in" an operations vice president to work with [Mr.] Giddens, Mr. Bell told Bloomberg. "The trustee is trying to get a clamp on the assets," Mr. Bell said. "We're looking at the next 10 days being very hectic." He declined to comment on any missing funds, according to Bloomberg. ----------------------------------------------------------------- [00009] NYSE SUSPENDS TRADING OF MF GLOBAL COMMON STOCK ----------------------------------------------------------------- NEW YORK -- November 1, 2011 -- NYSE Regulation, Inc., said it determined that the common stock of MF Global Holdings Ltd. -- ticker symbol MF -- should be suspended immediately. NYSE Regulation has determined that the Company is no longer suitable for listing. This decision was reached in view of the fact that both it and its MF Global Finance USA Inc. subsidiary filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code with the U.S Bankruptcy Court for the Southern District of New York on October 31, 2011. In addition, NYSE Regulation noted the uncertainty as to the timing and outcome of the bankruptcy process, as well as the ultimate effect of this process on the Company's common stockholders. Separately, as part of its assessment, NYSE Regulation also considered the Company's most recently filed quarterly net loss for the period ended September 30, 2011, as well as recent credit rating agency downgrades during the week of October 24, 2011, and the ongoing liquidity position of the Company. NYSE Regulation also reviewed an October 31, 2011 announcement from the Securities Investor Protection Corporation, indicating that it was initiating the liquidation of MF Global Inc., the Company's brokerage subsidiary, under the Securities Investor Protection Act. The Company has a right to a review of this determination by a Committee of the Board of Directors of NYSE Regulation. Application to the Securities and Exchange Commission to delist the issue is pending the completion of applicable procedures, including any appeal by the Company of the NYSE Regulation staff's decision. The NYSE noted that it may, at any time, suspend a security if it believes that continued dealings in the security on the NYSE are not advisable. ----------------------------------------------------------------- [00010] S&P LOWERS MF GLOBAL'S COUNTERPARTY CREDIT RATING TO 'D' ----------------------------------------------------------------- Standard & Poor's Ratings Services on Oct. 31 lowered its counterparty credit rating on MF Global to 'D' from 'BBB-'. "At the same time, we lowered the company's debt ratings to 'D'. We are removing the ratings from CreditWatch where they were placed on Oct. 26, 2011, with negative implications," S&P said. MF Global filed for Chapter 11 bankruptcy protection in a New York bankruptcy court early Monday. Standard & Poor's placed MF Global on CreditWatch negative on Oct. 26, 2011, following the company's announcement of a large generally accepted accounting principles loss for its second fiscal quarter of 2012 (quarter ended Sept. 30, 2011). "The CreditWatch placement reflected our view that the company would be unable to generate near-term profitability and that there would be potential funding pressure as confidence in the company eroded," S&P said. ----------------------------------------------------------------- [00011] MOODY'S DOWNGRADES MF GLOBAL'S LONG-TERM RATINGS TO 'Ba2' ----------------------------------------------------------------- Moody's Investors Service on Oct. 27 downgraded the long-term ratings of MF Global Holdings Ltd., including its senior, unsecured debt rating to Ba2 from Baa3. The ratings remain under review for possible further downgrade. RATINGS RATIONALE Moody's Investors Service downgraded the long-term ratings of MF Global Holdings Ltd., including its senior, unsecured debt rating to Ba2 from Baa3. The ratings remain under review for possible further downgrade. Moody's said the downgrade reflects Moody's 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. 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 noted. "The tactical decision to assume this outsized proprietary position, highlights the core profitability challenges faced by MF Global and the scope of the re-engineering challenge facing the firm's management," said Al Bush, a Moody's senior analyst. Moody's believes that the risk appetite revealed by this position, in tandem with the significant quarterly loss that MF Global reported, subjects the firm to a heightened risk of loss of client and counterparty confidence -- and could thus further challenge the company's franchise. The review for downgrade will focus on MF Global's ability to manage its franchise risk, including its success in retaining customers, counterparties and employees during the current stressed environment. Moody's noted that the Ba2 rating is supported by the firm's adequate liquidity profile and price transparency of a majority of the firm's assets. The last rating action on MF Global was on October 24, 2011, when Moody's downgraded the long-term issuer ratings to Baa3 from Baa2 and placed the ratings under review for further downgrade. MF Global is headquartered in New York. The principal methodology used in this rating was Global Securities Industry Methodology published in December 2006. Downgrades: Issuer: MF Global Holdings Ltd. -- Issuer Rating, Downgraded to Ba2 from Baa3 -- Multiple Seniority Shelf, Downgraded to (P)Ba2, (P)Ba3, (P)B1 from (P)Baa3, (P)Ba1, (P)Ba2 -- Pref. Stock Preferred Stock, Downgraded to B1 from Ba2 -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to Ba2 from Baa3 -- Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa3 ----------------------------------------------------------------- [00012] FITCH LOWERS MF GLOBAL'S IDR TO 'BB+/B' FROM 'BBB/F2' ----------------------------------------------------------------- Fitch Ratings on Oct. 27 has downgraded the ratings of MF Global Holdings Ltd. (MF) including the company's Issuer Default Ratings (IDR) to 'BB+/B' from 'BBB/F2'. At the same time, Fitch has placed the ratings on Rating Watch Negative. This rating actions reflect MF's continued challenges in establishing a sustainable level of profitability and improving its leverage profile. The low interest rate environment, which is expected to last over the medium term, and reduced commissions are hindering profitability in the firm's traditional clearing activities. Further, volatile capital markets present MF with significant headwinds in executing its strategic transformation from a pure broker to a broker-dealer and, longer term, to a full investment bank without outsized incremental risk. In addition, the firm's increase in principal and, to a lesser extent, proprietary trading activities has elevated the firm's traditional risk profile. These increased risk taking activities have resulted in sizeable concentrated positions relative to the firm's capital base, leaving MF vulnerable to potential credit deterioration and significant margin calls. While Fitch notes that the firm has made some progress in rationalizing its capital structure, the firm's persistently weak earnings and leverage are no longer consistent with an investment grade financial institution. Fitch expects to resolve the Rating Watch Negative on MF's ratings as the firm concludes the evaluation of various strategic options. Contemplated strategic initiatives include efforts to build scale in its futures commission merchant (FCM) and the disposition of assets, which could impact capitalization as well as the company's earnings profile. The resolution of the Rating Watch Negative could result in a ratings affirmation or a further downgrade of MF's ratings. MF Global Holdings Ltd. is a leading futures and options broker with subsidiaries in major financial hubs. Its main subsidiaries are registered futures commissions merchants and broker/dealers. MF is heavily regulated as a member of commodities, futures, and securities exchanges in the U.S., Europe and the Asia-Pacific region. Fitch has downgraded the following ratings for MF Global Holdings Ltd.: -- Long-term IDR to 'BB+' from 'BBB'; Rating Watch Negative; -- Short-term IDR to 'B' from 'F2'; Rating Watch Negative; -- Senior debt to 'BB+' from 'BBB'; Rating Watch Negative; -- Preferred to 'B+' from 'BB+'; Rating Watch Negative. ----------------------------------------------------------------- [00013] MF GLOBAL IMPLOSION HIGHLIGHTS REGULATORY GAPS, NGI SAYS ----------------------------------------------------------------- DULLES, Virginia -- Nov. 1, 2011 -- Shocking details surrounding the surprise bankruptcy of securities firm giant MF Global Holdings Ltd. were coming to light Tuesday, one day after the company turned in its Chapter 11 papers following an ill-timed bet on the European debt markets. While trading exchanges all over the globe rushed to protect their markets from the fallout, reports began to surface that the firm, which is headed by former New Jersey Gov. Jon Corzine, had failed to keep the company's money separate from its customers' accounts. There were anecdotal reports that hundreds of millions of MF Global customers' dollars are currently missing, according to Natural Gas Intelligence (NGI). Subsequent reports said the number could be even larger. In its bankruptcy filing to the United States Bankruptcy Court for the Southern District of New York on Monday, MF Global said the company had debt of $39.7 billion and assets of $41 billion. "The MF Global story is a fast-moving one. Tuesday morning people were saying a couple hundred million dollars of customer funds were missing. By Tuesday afternoon that number had ballooned to $700 million," said Ed Kennedy, a broker with INTL Hencorp Futures LLC. "This MF Global implosion will change the entire game because something is not passing the smell test here. Moving customer funds into the company's account is not a one- person operation. With the way regulations are now, an entire chain of people would have to be involved . . . and each one of those people sat through the ethics class. Also, what about the exchanges? What about their clearing operations? They know what is supposed to be in that segregated customer account." Kennedy said the shake-up and resulting investigation will certainly impact how the Dodd-Frank regulatory reform rules are written and implemented. "I guarantee a month from now this is what everyone is going to be talking about, and we'll take a look at it at our hedging seminar in Chicago in December," he said. Giving tips and teaching people how to use market tools to their advantage in today's market, Kennedy and his colleague Tom Saal will host a seminar: "Where the Market is Going and What Can You Do About It?" seminar Dec. 7-9 in Chicago. Visit http://seminar.intelligencepress.com/Hedging2011/ for more information. In responding to the MF Global crisis, trading exchanges such as CME Group, Nymex and ICE said Monday they were accepting "liquidation only" orders from MF Global clients and have restricted electronic access to their markets. In a statement on its Web site, MF Global said, "This means that you may place offsetting orders for current open positions at MF Global but may not place any new orders. Performance of your trades is guaranteed by exchange clearinghouses." During a 3Q2011 earnings conference call, CME Group CEO Craig Donohue said the exchange will no longer recognize MF Global or any of its divisions as a guarantor for purposes of floor trading privileges. "Throughout the day [Monday] our team worked closely with the firm, public customers and exchange members to assist customers in establishing new accounts in dealing with open positions and market exposures," Donohue said, adding that Monday was a "very difficult day for all concerned." For its part, ICE said MF Global is accepting and processing liquidating orders from customers with outstanding open positions in ICE Futures U.S. Inc. contracts. The Commodity Futures Trading Commission and Securities and Exchange Commission said Tuesday they had determined that a bankruptcy proceeding led by the Securities Investor Protection Commission (SIPC) would be "the safest and most prudent course of action to protect customer accounts and assets." SIPC announced Tuesday that it is initiating the liquidation of MF Global under the Securities Investor Protection Act. About the Natural Gas Futures Price Seminar Saal and Kennedy will be taking time off from active natural gas futures trading, in a repeat of the very popular Natural Gas Futures Hedging Seminar, at the JW Marriott Chicago, Dec. 7-9, 2011. For more information visit http://seminar.intelligencepress.com/hedging2011/ *** End of Issue No. 1 *** Future issues of MF Global Bankruptcy News are avaialble for purchase on-line at http://bankrupt.com/newsstand/