Shares of MF Global Holdings Ltd hit another all-time low and bonds were in freefall on Friday as troubles intensified for the U.S. futures brokerage that is looking to sell off units in order to retain customers, and to survive.
The company run by former Goldman executive Jon Corzine has shed 62 percent of its market capitalization this week, after it posted a quarterly loss, and after two ratings agencies cut its debt rating to junk.
MF Global stock dropped as much as 27 percent in early trading to $1.04, its lowest ever, but later rebounded to $1.29 on the New York Stock Exchange.
The company's bonds were trading at distressed levels in the mid-40s, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70.
MF Global had offered the notes at par in August.
Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear.
MF Global tapped Evercore to advise it on strategic options including a possible sale, said a source familiar with the situation.
A second source, who was briefed on the matter, said the company is focused on doing a smart deal, a fair deal, and that it did not enter the talks with specific targets and objectives.
We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital, Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients.
However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity, she wrote.
MF Global has declined to comment on its troubles.
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.
But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.
The loss of its investment grade rating could hasten the exodus of customers away from MF Global.
Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status, Deutsche Bank analyst Michael Carrier wrote to clients.
European Union leaders stuck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.
In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.
(Reporting by Jonathan Spicer, John Balassi, Philip Scipio and Paritosh Bansal in New York, and Charmian Kok in Singapore; Editing by Phil Berlowitz and Matthew Lewis)