Fitch Assigns Recovery Ratings on MF Global's Debt

Tools

NEW YORK--(BUSINESS WIRE)-- In a follow-up to Fitch Ratings' previous press release on MF Global Holdings Ltd. Dated Oct. 31, 2011, Fitch is now in a position to assign Recovery Ratings (RR) for the company's outstanding obligations. MF's Long-term and Short-term Issuer Default Ratings remain at 'D'. Fitch has assigned RRs on MF's debt as follows:

--Senior unsecured debt 'C/RR5';

--Preferred stock 'C/RR6'.

Fitch's analysis resulted in a projected recovery in the range of 10%-30% for the senior unsecured notes and 0%-10% for the preferred stock. For further details on RRs, please see Fitch's report 'Recovery Ratings for Financial Institutions'.

Fitch's recovery analysis is based on MF's most recent public consolidated financial statements at Sept. 30, 2011. Consolidated assets of MF totaled approximately $41 billion and liabilities amounted to $39.7 billion as of that date. In its analysis, Fitch considered $2.2 billion of outstanding senior unsecured debt and $130.6 million of preferred stock, of which $34.4 million was rated by Fitch.

Fitch's recovery analysis includes a number of assumptions. Fitch notes that the recovery value would be significantly altered by any change to Fitch's assumptions. The recovery value would be particularly sensitive to any use of cash not factored into Fitch's analysis as well as any developments affecting the availability of clients' funds from segregated accounts.

Haircuts were applied to assets using primarily discount factors under a 'BBB' stress scenario contained in Fitch's report entitled 'Rating Closed-end Fund Debt and Preferred Stock'. Non-financial assets were fully discounted. Asset discounts in this analysis reflect buyers' knowledge of the need to sell rather than depressed market conditions. That said, current market conditions, particularly Eurozone government bond prices, could further impede recovery. A present value discount was not applied and therefore, timing could negatively influence recovery levels.

Collateral requirements are not always clearly disclosed in financial statements. Fitch assumes that MF experienced additional margin calls totaling 3% of its Eurozone government repo-to-maturity portfolio (gross amount: $7.6 billion). Fitch also assumes that the cash balance at MF was increased by additional draws under the revolver (approximately $1 billion) post Sept. 30, 2011. Fitch also assumes a charge for administrative fees equal to approximately 1% of total reported assets plus the gross amount of the Eurozone repo-to-maturity portfolio as of Sept. 30, 2011. The relatively low administrative fee assumed reflects primarily the preponderance of securities on MF's balance sheet. This assumption has a significant impact on the estimated recovery value. Finally, Fitch's recovery analysis does not factor in a sale of any of MF's operations, particularly its broker-dealer subsidiaries.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Criteria' (Aug. 16, 2011);

--'Securities Firms Criteria' (Aug. 16, 2011).

--'Recovery Ratings for Financial Institutions' (Aug. 16, 2011);

--'Rating Closed-end Fund Debt and Preferred Stock' (August 16, 2011).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840

Recovery Ratings for Financial Institutions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648615

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649173

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

CONTACT:

Fitch Ratings
Primary Analyst
Fabrice Toka, +1-212-908-0369
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Leslie Bright, +1-212-908-0622
Senior Director
or
Committee Chairperson
Thomas Abruzzo, +1-212-908-0793
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
Email: brian.bertsch@fitchratings.com