JC Flowers, a veteran investor in distressed financial services firms, has agreed to invest a minimum of $150 million (€96 million) in the world’s largest futures and options brokerage, MF Global.
The US private equity firm will backstop up to $300 million of a future public or private securities offering, which will occur after the beleaguered Bermuda-based company files its annual report in June.
MF’s sale of securities will pay back part of a $1.4 billion bridge loan it took out in connection with its July 2007 initial public offering and spin-out from Man Group, a London Stock Exchange-listed alternative asset manager. MF said it is currently trying to refinance the loan, a condition required by the JC Flowers’ agreement.
The preferred shares, redeemable after five years, will be convertible at any time into common shares at an initial price of $12.50 per share.
Under terms of the agreement, JC Flowers will also have the right to appoint up to two MF board directors.
The NYSE-listed brokerage firm simultaneously announced a fiscal fourth quarter net loss of $71 million, but a net income increase of $61 million, or 40 percent, compared to the same period last year.
Its annual net loss was $57.6 million, while net income for the year ended 31 March 2008 increased 43 percent to $211.8 million.
In February, MF took a $142 million hit connected to a rogue trader who allegedly took unauthorised positions on wheat futures. At the time, MF said the loss represented 6 percent of its equity.