If you can’t beat’em, join’em, even if they are posting millions in losses and facing a mountain of debt.
That’s buyout shop J.C. Flowers & Co.’s apparent strategy: It has agreed to buy as much as US$300 million in futures broker MF Global equity. MF Global, the former Man Group unit, will use the proceeds to pay down and restructure its debt.
More than two years ago, Man outbid J.C. Flowers for Refco’s brokerage unit. Now, J.C. Flowers’ stake gives it the right to name two directors to MF Global’s board, the company said.
Bermuda-based MF Global was rocked in February by a trading scandal when a trader in its Memphis office made unauthorized wheat futures trades. The firm posted a US$71.1 million loss in its fiscal fourth quarter in the wake of the bad publicity. Facing US$350 million in loans due next month, and another $1.05 billion due in December, the futures broker said today it is trying to refinance a US$1.4 billion bridge loan, and will use a five-year revolving loan to pay off US$350 million in debt.