MF Global Holdings Ltd
MF Global scrambled through the weekend to find buyers for all or part of the company, and it hired restructuring and bankruptcy advisers, according to sources familiar with the situation.
The tentative plan calls for MF Global's holding company to file for bankruptcy protection and derivatives trader Interactive Brokers Group Inc
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 eurozone debt crisis.
The Federal Reserve Bank of New York has informed MF Global Inc that it has been suspended from conducting new business with the New York Fed, the Fed said.
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.
The company's shares were suspended before trading opened in New York, pending a statement. Its 6.25 percent notes due 2016 were last trading at about 35 cents on the dollar, a deeply distressed level, after touching a morning low of 15. They were offered at par in August.
The company has declined to comment, even as its 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.
Interactive Brokers, am electronic broker-dealer and market maker run by industry veteran Thomas Peterffy, would likely make an initial bid of about $1 billion (623 million pound) during a court-supervised auction for the brokerage, the WSJ said.
Outside MF Global's headquarters in midtown Manhattan on Monday, TV cameras were lined up but few people were entering or leaving the building.
In London, MF Global clients said the company was not taking on new business and they were closing out positions.
It was quite difficult to get our money out on Friday, because they had a lot of redemption calls, said a trader, whose firm used MF Global as a brokerage.
The company is not initiating any new position. They are trying to close down positions that they already have with clients that are open, the trader said.
MF Global was added in February by the New York Fed to the list of financial firms that work directly with the U.S. government to help manage monetary policy and sell U.S. debt, known as primary dealers.
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.
The New York Times reported in its electronic edition that by Sunday evening, the talks had narrowed to one bidder, Interactive Brokers.
Sullivan & Cromwell's restructuring and mergers teams have joined the long roster of those advising MF Global, one source familiar with the situation said.
Weil, Gotshal & Manges was also hired to prepare potential restructuring options, a second source familiar with the situation said. The sources could not be identified by name because the talks were not public.
Weil would focus on MF Global's UK subsidiary if it needed to pursue a formal restructuring overseas, the Journal reported in its electronic edition. The securities company also has hired firm Skadden, Arps, Slate, Meagher & Flom, the newspaper said.
A number of interested parties were considering several possible deals on Sunday, including buying all or parts of MF Global, said one source briefed on the matter.
The goal is squarely for some sort of M&A transaction, the source said, adding the situation was fluid.
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.
MF Global has given potential buyers limited information about its financials and has not set up a data room for bidders to conduct due diligence, a buy-side source said earlier.
The source, who is looking in to deals both for the whole company and for its parts, said the company's positions are big and hard to value, especially the firm's sovereign risk exposure.
How do you put a price on that? How do you get a deal done when the right side of the balance sheet keeps moving so dramatically? the source said.
The company hired boutique investment bank Evercore Partners Inc
(Additional reporting by Caroline Humer and Nick Brown in New York, Tom Hals in Wilmington, Jessica Hall in Philadelphia, Narayanan Somasundaram in Sydney, Douwe Miedema and Dominic Lau in London; Editing by Dale Hudson, Vinu Pilakkott, Muralikumar Anantharaman and Erica Billingham)