MF Global announcement

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Corzine clause in recent bond sale:

"Call MF Global's CEO Jon Corzine the $325 Million Dollar Man "

http://www.cnbc.com/id/45034792

Less well known is that back in August, the commodities giant sold $325 million of five-year unsecured bonds that included a provision that would offer higher interest rates if Mr. Corzine left the firm for a government job.
 
what are the chances that majority of bondholders would rescind the clause and accept a lower rate if he leaves and the bonds get paid off earlier?

if there is a 60% haircut on the southern european sovereign bonds what happens to mf global?
 
Quote from zdreg:

what are the chances that majority of bondholders would rescind the clause and accept a lower rate if he leaves and the bonds get paid off earlier?

if there is a 60% haircut on the southern european sovereign bonds what happens to mf global?
More...

The earnings release says
"As of September 30, 2011, MF Global maintained a net long position of $6.3 billion in a short-duration European sovereign portfolio financed to maturity (repo-to-maturity), including Belgium, Italy, Spain, Portugal and Ireland"

so a 60% haircut (at this stage) is unlikely, especially for Italy, Spain and Belgium.

There is a chance that bondholders could rescind that clause, but given today's announcement, they would have to raise new debt (or equity) at much higher interest rates. So in practice, the clause will probably remain.

In my eyes the biggest concern for the company in the coming weeks and months is a significant loss of customer assets and trading revenue. I will assume that the net trading revenue for this quarter will be lower than last quarter, and that they will report another quarterly loss. With Moodys close to cutting their credit rating to junk, the future looks bleak.
 
Quote from m22au:

The earnings release says
"As of September 30, 2011, MF Global maintained a net long position of $6.3 billion in a short-duration European sovereign portfolio financed to maturity (repo-to-maturity), including Belgium, Italy, Spain, Portugal and Ireland"

so a 60% haircut (at this stage) is unlikely, especially for Italy, Spain and Belgium.

There is a chance that bondholders could rescind that clause, but given today's announcement, they would have to raise new debt (or equity) at much higher interest rates. So in practice, the clause will probably remain.

In my eyes the biggest concern for the company in the coming weeks and months is a significant loss of customer assets and trading revenue. I will assume that the net trading revenue for this quarter will be lower than last quarter, and that they will report another quarterly loss. With Moodys close to cutting their credit rating to junk, the future looks bleak.
More...

thx for your thoughtful response.
 
Here is some more detail on the PIIGS bonds held by MF:

http://ftalphaville.ft.com/blog/2011/10/25/711566/mf-globals-eurozone-trades/

includes a link to

http://www.mfglobalinvestorrelation...4911&p=irol-newsArticle&ID=1620914&highlight=

which is repeated here
http://finance.yahoo.com/news/MF-Global-Reports-Second-bw-3226318076.html

"MF Global Reports Second Fiscal Quarter 2012 Results"

****

all figures in millions

total $6,292

Italy $3,213
Spain $1,111
Belgium $603
Portugal $997
Ireland $368

latest maturity for portfolio is December 2012.
 
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