MF Global plans to price $300 million of convertible preferreds, convertible notes

By Rebecca Melvin

New York, June 17 - MF Global Ltd. plans to price $150 million of non-cumulative perpetual convertible preference shares and $150 million of convertible senior notes in two private offerings after the market close Thursday, according to a market source.

There is a $30 million greenshoe for each of the two Rule 144A offerings.

The convertible preference shares were talked to yield 4.75% to 5.25% with an initial conversion premium of 10% to 15%.

The preference shares are non-callable for five years, with forced conversion thereafter at 125% of the conversion price. There are no puts.

The 30-year convertible senior notes were talked with a coupon of 4% to 4.5% and an initial conversion premium of 15% to 20%.

They are also non-callable for five years, with a put in year five and at various subsequent dates.

Proceeds of the offerings, together with other components of the company's capital plan, will be used to repay its outstanding bridge loan due in December 2008.

The offerings follow the company's previous announcement that it received a $300 million backstop commitment from an affiliate of J.C. Flowers & Co. LLC to purchase a separate series of convertible preference shares.

Under the backstop commitment, J.C. Flowers will buy up to $300 million of a separate series of convertible preference shares, reduced by the amount sold in the private offering of convertible preference shares described above, but not less than a minimum amount of $150 million.

Tight credit spreads

MF Global also said that estimated net revenue for its current fiscal first quarter is expected to range from about $360 million to $390 million.

The company also estimates the narrowing of short-term credit spreads has had a negative impact on net interest income and overall pre-tax margins in the first quarter. For liquidity purposes, the company strategically positioned its client assets in short-term overnight securities in the fiscal fourth quarter of 2008. The company believes that rising interest rates and a steepening of the zero- to two-year yield curve creates opportunities to enhance its interest income over the fiscal second, third and fourth quarters of 2009.

Estimated total volume is expected to range from 530 million to 580 million lots for the first quarter. Client assets at the end of May were about $15.4 billion.

The company also now expects increased non-compensation costs in the current quarter as a result of ongoing changes to its business information, risk management and monitoring systems and corresponding increases in professional fees.

It also said it expects some of these costs to only impact its current quarter while other of these costs will be permanent in nature and will be reflected in the company's results.

In addition, the company expects one-time termination costs of $6 million to $8 million in pre-tax income in the first quarter from a strategic realignment of staff around the globe. However, cost savings from these efforts are not expected to be realized over the latter part of this fiscal year and the early part of fiscal 2010.

Bermuda-based MF Global is a broker of exchange-listed futures and options.

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