MF Global had a pretty tough first quarter as rogue trader Evan Dooley cost the firm $141 million in overnight wheat trades in February and rumors of a connection with a Bear Stearns investor pushed its stock price to below $5 on March 17. Since then, MF stock has inched its way back to the somewhat depressed levels that followed the wheat incident.
Today MF Global announced in its 2008 fiscal fourth quarter (first quarter) earnings report and tried to place a positive spin on it but the biggest item was that private equity firm J.C. Flowers & Co. LLC would make a $300 investment in MF Global.
MF reported a $71.1 million loss for the quarter and losses of $57.6 million for the fiscal year ending in March. It also reported total futures and option volume grew 38% year over year and net revenues increased by 10%.
An MF Global spokesperson described the injection by Flowers as an investment in “hybrid securities.”
The release states, “J.C. Flowers has agreed to provide a backstop commitment of $300 million toward the sale of equity-linked securities. Following the filing of the company's annual report on Form 10-K in June, MF Global may conduct a public or private offering of these securities. Under the terms of the backstop commitment, J.C. Flowers will purchase a minimum of $150 million and a maximum of $300 million of any offering of these securities.”
"This investment represents a tremendous vote of confidence in the strength of MF Global's diversified business model and market leadership position by a sophisticated investor, with deep knowledge of the financial services industry," said MF Global CFO Randy MacDonald in a release.
MF Global also said that it will close all of its branch offices this year. The firm has already closed the Memphis Tenn. branch office where unauthorized wheat trades in February of this year caused a $141 million loss for MF. The spokesperson says the offices will either transition to introducing broker relationships or be sold.