MF Global files for bankruptcy after deal unravels

By Jonathan Spicer and Nick Brown

MF Global

Goldman Sachs

Jon Corzine

The firm's meltdown in less than a week following big bets on euro-zone debt is a stunning setback for Corzine, who sought to turn MF Global into a mini-Goldman after losing his governorship of New Jersey after an election.

The bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier Monday, a person familiar with the matter said. Hours earlier, central banks and exchanges had slapped the broker with suspensions.

Markets worldwide started to feel the impact Monday.

Three traders wearing MF Global jackets were seen leaving the Chicago Board of Trade prior to the opening of pit trading, and floor sources told Reuters they had been turned away after their security access cards were denied. They declined to comment.

MF Global Finance USA Inc also filed for Chapter 11 protection, court records show. Both MF Global entities filed for protection from creditors with the U.S. bankruptcy court in Manhattan.

MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.

The company, which under Corzine ramped up more risky proprietary trading, is suffering because of low interest rates and bets it made on European sovereign debt, making it possibly the most prominent U.S. casualty yet from the euro-zone debt crisis.

Its shares remained halted in New York.

The New York Federal Reserve suspended the company from conducting new business with the central bank. CME Group Inc ICE Futures U.S. and Singapore Exchange all halted MF Global's operations in some form.

MF Global's deeply distressed 6.25 percent notes maturing in 2016 fell 10.5 cents on the dollar to 39.5 cents, pushing their yield up to 31.6 percent, according to the Trace bond pricing service. The price had earlier fallen as low as 15 cents.

The company's shares and bonds plunged in recent days. In the past week, MF Global posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

MF Global was in talks on Sunday with possible buyers, aiming "squarely" to do a deal, though all options remained on the table as the firm hired restructuring and bankruptcy advisers, sources familiar with the situation told Reuters.

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

The company hired boutique investment bank Evercore Partners Inc to help find a buyer, separate sources said this past week.

(Additional reporting by Paritosh Bansal, Caroline Humer, Nick Brown and Lauren LaCapra and Jonathan Stempel in NEW YORK, Tom Hals in WILMINGTON, Jessica Hall in PHILADELPHIA, Narayanan Somasundaram in SYDNEY, Douwe Miedema and Dominic Lau in LONDON; Editing by Erica Billingham, Matthew Lewis, Dave Zimmerman)