New York, October 27, 2011 -- Moody's Investors Service downgraded the long-term ratings
of MF Global Holdings Ltd. ("MF Global"), 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. ("MF Global"), 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 our 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. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
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
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are considered EU Qualified
by Extension and therefore available for regulatory use in the EU.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following :
parties involved in the ratings, public information, and confidential
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Moody's considers the quality of information available on the rated
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Please see Moody's Rating Symbols and Definitions on the Rating Process
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Al Bush
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades MF Global to Ba2; reviews for further downgrade