Unstructured Finance

MF Global a month later and still a mystery

By Matthew Goldstein

It’s been about a month since MF Global began spiraling towards bankruptcy and still there’s no clarity about what happened to the missing customer money that was supposed to be kept in untouchable, segregated accounts. It’s not even clear how much money is missing.

When the Jon Corzine-led firm filed for bankruptcy on Halloween, it was believed some $900 million in customer money couldn’t be accounted for in MF Global’s segregated accounts maintained at Harris Banks and other institutions. That sum was quickly revised downward to about $600 million. And the number remained at $600 million until the court-appointed liquidation trustee surprised everyone last week by saying more than $1.2 billion in customer money might be missing.

But now even that $1.2 billion figure is in doubt. Officials with the CME quickly questioned the much higher figure and so did other regulators. A law enforcement source tells me federal investigators also doubt the $1.2 billion figure and believe the missing money is still about $600 million.

Still, $600 million is a lot of money and it’s a bit mystifying that regulators and federal investigators have yet to come up with a good working explanation for where the loot went.

At this point it seems pretty clear MF Global–whether intentionally or negligently–was commingling customer money with the firm’s own money. The speculation is that as the firm was careening towards bankruptcy, MF Global dipped into the segregated customer account to cover margin calls on the firm’s own trades and ones it made with customer money. But that’s just educated speculation–not an official working narrative of events.

MF Global and the rubber check

By Matthew Goldstein

With the mystery of the missing $600 million in customer funds at MF Global Financial still unresolved, a lot of customers of the failed futures firm are starting to complain about getting bounced checks.

It appears that 10 days ago, with speculation swirling that the Jon Corzine-led firm would soon file for bankruptcy, a good number of customers started to put in requests to pull their money from the New York-based outfit. But instead of simply wiring that money back to their customers, it seems MF Global tried to buy some time for itself by sending that money back via snail mail in the form of an old-fashioned check.

Those checks cut by the folks at MF Global began arriving in customer mailboxes this week, several days after the firm filed for bankruptcy on Oct. 31 in New York federal court. And by the time customers started depositing those checks, they were rejected as having insufficient funds.

Deals wrap: Splitting up ConocoPhillips

Integrated energy company ConocoPhillips said it would split its businesses into two stand-alone, publicly traded corporations by spinning off its refining and marketing business.

Borders Group’s buyout deal with private equity firm Najafi Companies collapsed, raising the possibility that the bankrupt bookseller could be forced to liquidate its remaining stores and go out of business.

L-3 Communications, which faces breakup pressure from an activist investor, is expected to divest some low-end services assets but does not plan a broader portfolio restructuring such as a breakup, people familiar with the situation said.

Deals wrap: Dodgers strike out

The Los Angeles Dodgers filed for bankruptcy protection, blaming Major League Baseball for refusing to approve a television deal with News Corp’s Fox Network to give the financially strapped baseball team a quick injection of cash.

The WSJ’s DealBook reports the best part of the filing is who the Dodgers owe money to. Manny Ramirez is owed $21 million.

London Stock Exchange boss Xavier Rolet faces a crucial test this week as TMX Group owners vote on their planned merger with the LSE – a deal on a knife-edge that is likely to define his tenure.

Deals wrap: Blavatnik’s Access Industries wins bid for Warner Music

The headquarters of Warner Music Group is pictured in Burbank, California August 5, 2008. REUTERS/Fred Prouser

Russian-born billionaire Len Blavatnik’s Access Industries has won control of Warner Music Group with an offer of $8.25 a share, according to a source familiar with the matter. The agreement would set the world’s third-largest music company’s enterprise value at approximately $3.3 billion.

The NYTimes’s Ben Protess shines a light on Len Blavatnik, chairman of Access Industries and the new controlling stakeholder of Warner Music Group. Well-known for his investing prowess, he came to America as a penniless teenager and after building a fortune on oil and metal companies, he’s worth roughly $10 billion.

Deals wrap: Can Genzyme play hardball?

A sign marks the headquarters of Genzyme in Cambridge, Massachusetts August 3, 2010. REUTERS/Brian Snyder   Genzyme may be holding out for more money from suitor Sanofi-Aventis, but will find it difficult to persuade investors it is better off on its own.  *View article *View Genzyme timeline

When GM filed for bankruptcy last summer, the automaker wiped out creditors, and critics warned that Wall Street investors would have a long memory. What a difference a year makes. *View article

What’s better than an angel investor? That would be a super-angel investor, of course. This new breed is shaking up the venture-capital industry. *View WSJ article

Deals wrap: Selling the ex-bankrupts

A Chevrolet logo is seen on a car displayed on the exhibition stand of Chevrolet during the first media day of the 80th Geneva Car Show at the Palexpo in Geneva March 2, 2010.      REUTERS/Valentin Flauraud General Motors’ coming initial public offering may be a hard sell. After all, the automaker burnt investors with its Chapter 11 filing a little over a year ago. The IPO of GM and, in time, those of other cleaned up ex-bankrupts like Delphi and Chrysler, deserve cautious investor interest. *View article

Barnes & Noble shares soared 21 percent after the struggling bookseller said it was up for sale and could get a bid from its founder to go private. *View article *View NYT’s article on who may bid for the company

Citigroup is poised to put its British online bank Egg up for auction as part of a plan to dispose of billions of dollars in unwanted assets, the Financial Times says. *View article

General Growth battle intensifies

The battle for control of General Growth, owner of shopping centers across America, continues, as it  weighs two rival offers.

General Growth, which is trying to exit bankruptcy, will consider at a board meeting Thursday whether to postpone a key court hearing set for Friday as it continues talks with suitors Simon Property and Brookfied Asset Management.

It has asked Simon to increase its $5.8 billion bid. General Growth may also come back with a new counter0ffer on antitrust issues that could arise from a merger of the two largest U.S. mall owners.

Blockbusted – Icahn cuts stake in troubled video chain

Blockbuster‘s biggest shareholder, and one of the market’s most prominent activist investors, is heading for the door, heaping another note of gloom to the video chain’s hopes to avoid bankruptcy.

Filings show Billionaire investor Carl Icahn cut his stake in Blockbuster by selling more than 13 million shares. Over the past week he trimmed his ownership of the Class A shares to 5.1 percent as of March 29, according to a federal filing. In January he reported a 16.9 percent stake. He also reduced his stake in the company’s Class B shares.

To be fair, Blockbuster is already positioning itself for a trip to Bankruptcyland, having said earlier this month that it might need to file for protection from creditors.

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