The following story appeared in Bloomberg on November 10, 2011:
MF Global Holdings Ltd.’s bondholders may recover as little as 10 cents on the dollar in the company’s bankruptcy, according to Fitch Ratings.
Owners of the failed broker’s senior unsecured debt will get back between 10 percent and 30 percent of the notes’ face value, Fitch said today in a report. The analysis is based on MF Global’s balance sheet as reported in public filings and doesn’t consider the potential performance of the broker’s European sovereign debt portfolio, said Fabrice Toka, an analyst at the ratings company in New York.
Money managers traded $477 million of MF Global’s debt since its bankruptcy filing on Oct. 31, betting on the amount that creditors will recover in the futures broker’s bankruptcy, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
MF Global’s $325 million of 6.25 percent notes sold in August at par and due in 2016 fell for a sixth day to 34.75 cents on the dollar as of 2:11 p.m. in New York from 50 cents at the end of October, Trace data show.
The futures broker filed the eighth-largest bankruptcy in U.S. history after bets on European sovereign debt rattled investors who pulled money out of the firm. The U.S. Commodity Futures Trading Commission is investigating a $593 million- shortfall in its customers’ accounts, the agency said today.
MF Global didn’t include the European portfolio on its balance sheet and the missing funds aren’t included in the rating firm’s recovery analysis, Toka said.
“We don’t make an assumption in terms of how it’ll perform,” Toka said of the bond bet in a telephone interview.
Creditors including JPMorgan Chase & Co., hedge fund Elliott Management Corp. and Bank of America NA formed a committee this week to seek recoveries from New York-based MF Global.
The analysis also doesn’t include any money from a potential sale of MF Global’s operations, Fitch said in the report. Investors holding MF Global’s preferred stock may receive nothing or as much as 10 percent, the report shows.
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KlaymanToskes is continuing to investigate claims against underwriters of Notes issued by MF Global (OTC: MFGLQ.PK) including MF Global 6.250% Senior Notes due 2016, MF Global 3.375% Convertible Senior Notes due 2018 and MF Global 1.875% Convertible Senior Notes due 2016. Particularly, KlaymanToskes is investigating what these underwriters knew or should have known concerning the financial problems of MF Global, and whether material information concerning MF Global was adequately disclosed in the Notes’ prospectuses. It has been reported that in retrospect, prospectuses for certain MF Global bond offerings appear to be misleading. Underwriters of MF Global Notes include Jefferies (NYSE: JEF), BofA Merrill Lynch (NYSE: BAC), BMO Capital Markets (NYSE: BMO), Lebenthal & Co., Commerzbank, Sandler O’Neill + Partners, Natixis and US Bancorp (NYSE: USB).
Underwriters of MF Global securities were faced with legal action only three years ago. In early 2008, a class action lawsuit was filed against various underwriters for failure to conduct an adequate due diligence investigation into MF Global before its IPO and they also failed to reveal, that at the time of the IPO, that MF Global lacked basic risk management and trading risk safeguards. The Complaint further alleged that the Registration Statement and Prospectus issued in connection with MF Global’s IPO were materially false and misleading. In 2011, a $90 million settlement was reached with MF Global and the Underwriter Defendants. MF Global’s contribution to the settlement was only $2.5 million.
Underwriters of a securities offering have an obligation to conduct adequate due diligence of the issuer during the underwriting process. Further, underwriters are charged with the duties of ensuring the accuracy of the securities registration statements and prospectuses, and that investors are provided with full and fair disclosure of material information concerning the securities and issuing company. The Securities Act of 1933 subjects underwriters to potential liability for any material misrepresentations or omissions contained in a registration statement or prospectus. Investors alleging violations of the Securities Act do not need to demonstrate that the underwriters who approved the offerings’ disclosure documentation intended to deceive investors, but only that the documents were deficient.
Retail and institutional investors who purchased MF Global Notes can contact KlaymanToskes to explore their legal rights and options. The attorneys at KlaymanToskes are dedicated to pursuing claims on behalf of investors who have suffered substantial investment losses. KlaymanToskes, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
If you are a purchaser of MF Global Notes, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of KlaymanToskes, at 888-997-9956.