Fitch downgrades MF Global

Fitch Downgrades MF Global's LT IDR to 'BB+', ST IDR to 'B'; Rtg Watch Negative

Fitch Ratings-New York-27 October 2011: Fitch Ratings has downgraded the ratings of MF Global Holdings Ltd. (MF) including the company's Issuer Default Ratings (IDR) to 'BB+/B' from 'BBB/F2'. At the same time, Fitch has placed the ratings on Rating Watch Negative. A complete list of rating actions follows at the end of this release.


Today's rating actions reflect MF's continued challenges in establishing a sustainable level of profitability and improving its leverage profile. The low interest rate environment, which is expected to last over the medium term, and reduced commissions are hindering profitability in the firm's traditional clearing activities. Further, volatile capital markets present MF with significant headwinds in executing its strategic transformation from a pure broker to a broker-dealer and, longer term, to a full investment bank without outsized incremental risk.

In addition, the firm's increase in principal and, to a lesser extent, proprietary trading activities has elevated the firm's traditional risk profile. These increased risk taking activities have resulted in sizeable concentrated positions relative to the firm's capital base, leaving MF vulnerable to potential credit deterioration and/or significant margin calls. While Fitch notes that the firm has made some progress in rationalizing its capital structure, the firm's persistently weak earnings and leverage are no longer consistent with an investment grade financial institution.

Fitch expects to resolve the Rating Watch Negative on MF's ratings as the firm concludes the evaluation of various strategic options. Contemplated strategic initiatives include efforts to build scale in its futures commission merchant (FCM) and/or the disposition of assets, which could impact capitalization as well as the company's earnings profile. The resolution of the Rating Watch Negative could result in a ratings affirmation or a further downgrade of MF's ratings.

MF Global Holdings Ltd. is a leading futures and options broker with subsidiaries in major financial hubs. Its main subsidiaries are registered futures commissions merchants and broker/dealers. MF is heavily regulated as a member of commodities, futures, and securities exchanges in the U.S., Europe and the Asia-Pacific region.

Fitch has downgraded the following ratings for MF Global Holdings Ltd.:

· Long-term IDR to 'BB+' from 'BBB'; Rating Watch Negative;

· Short-term IDR to 'B' from 'F2'; Rating Watch Negative;

· Senior debt to 'BB+' from 'BBB'; Rating Watch Negative;

· Preferred to 'B+' from 'BB+'; Rating Watch Negative.

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