New York, October 24, 2011 -- Moody's Investors Service downgraded the long-term ratings
of MF Global Holdings Ltd. ("MF Global"), including
its senior, unsecured debt rating to Baa3 from Baa2. The
rating is under review for possible further downgrade.
RATINGS RATIONALE
The rating action reflects Moody's view that the current low interest
environment and volatile capital markets conditions make it unlikely that
MF Global, in the near term, will be able to achieve the financial
targets that Moody's had previously specified were required for
it to maintain a Baa2 rating. These included generating $200-$300
million in annual pre-tax earnings and managing its balance sheet
leverage in the 20x range, a level that would be consistent with
other similarly rated broker-dealer peers.
Moody's also said that it has become increasingly concerned with
MF Global's risk management and management's ability to prudently
balance risk and reward as it undergoes a substantial re-engineering
of the firm.
"MF Global's increased exposure to European sovereign debt
in peripheral countries and its need to inject capital into its broker-dealer
subsidiary to rectify a regulatory capital shortfall highlights the firm's
increased risk appetite and raises questions about the firm's risk
governance," said Moody's senior analyst Al Bush.
These issues will be a key consideration during Moody's review of
MF Global for possible further downgrade.
Moody's said that MF Global continues to transform and diversify
its business model, but this re-engineering is challenged
by the ongoing volatility and uncertainty in the economy and financial
markets. This will also be a point that Moody's will consider
during its review for downgrade.
The last rating action on MF Global was on February 3, 2011,
when Moody's affirmed the Baa2 long-term issuer rating and
maintained a negative outlook.
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 Baa3
from Baa2
....Multiple Seniority Shelf, Downgraded
to (P)Baa3, (P)Ba1, (P)Ba2 from (P)Baa2, (P)Baa3,
(P)Ba1
....Pref. Stock Preferred Stock,
Downgraded to Ba2 from Ba1
....Senior Unsecured Conv./Exch.
Bond/Debenture, Downgraded to Baa3 from Baa2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from Baa2
Outlook Actions:
..Issuer: MF Global Holdings Ltd.
....Outlook, Changed To Rating Under
Review From Negative
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
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
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be available. Consequently, Moody's provides a date that
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on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
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 Baa3; reviews for further downgrade