MF Global, the holding company for the broker- dealer that is run by ex-Goldman Sachs, co-chairman John Corzine is filing for bankruptcy in an attempt to restructure after making failed investments on European sovereign debt. MF Global Inc., the broker-dealer unit is facing complete liquidation.
In the bankruptcy filing the company listed debt of $39.7 billion with assets of $41 billion. The company filed Chapter 11 in the US bankruptcy court in Manhattan today. Over the weekend, the ailing company’s board met to decide on their options which included selling the company out of bankruptcy. The board decided on bankruptcy filing because of deficiencies in customer accounts, according to a statement by the US Securities and Exchange Commission.
The former governor of New Jersey, Jon Corzine was intending to transform and MF Global into a midsize investment bank when he started there in March 2010. Corzine, helped run Goldman Sachs from 1994 to 1999. When he started at MF Global he increased the firm’s risk, using its own money to trade, including the volatile investments in European sovereign debt that has recently shaken the markets severely.
The bankruptcy filing of MF Global makes it the fifth largest financial company to file. Other high profile financial companies to file for bankruptcy were Lehman Brothers, Washington Mutual, CITI Group and Conseco in order of first the fourth-largest bankruptcy filings.
The company owns $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt. Recent concerns that the company might lose large amounts of money on holdings because of Europe’s debt crisis led regulators to increase margin calls and boost capital. The regulators also advised MF Global on filing bankruptcy to be a safe course of action for them.
The broker-dealer unit, MF Global Inc. was sued by the Securities Investor Protection Corporation forcing liquidation to protect the customer’s assets. Broker dealers are not eligible to file Chapter 11 bankruptcy and need to sell off assets or liquidate, rather than reorganize.