MF Global Holdings Ltd. has filed for bankruptcy due to its overextension of European debt which will not be repaid. MF Global was a giant investment company with over 2000 employees worldwide.
Deutsche Bank and JPMorgan Chase are the company’s largest creditors. MF Global owes Deutsche Bank more than $one billion and owes JPMorgan over $1.2 billion. Deutsche Bank’s American listed shares fell 8.7 percent while JPMorgan shares lost 3.3% of their value.
Where did MF Global go wrong? They took a risk that they could not handle. The company took on over $6 billion of debt from debt-ridden European countries. They purchased bonds from Portugal, Spain and Italy. These bonds were paying a higher yield than U.S. Treasury bonds because it was believed that the bonds were likely to default. Guess what? The bonds defaulted and among those holding the bag was MF Global. I believe that this was more than just bad judgement because the whole world knew that the countries were deep in debt. Greed blinded the company’s eyes. MF Global bought these high risk bonds and that brought the company down.
MF Global had a $191 million loss for the third quarter which was the last straw. Shortly after announcing the third quarter loss, bankruptcy was filed and the stock exchange ceased trading the company’s stock. Let Us all learn an investing lesson Form MF Global.