October 25, 2011 / 10:45 AM / 7 years ago

UPDATE 3-MF Global posts Q2 loss on market volatility

* Q2 adj loss/shr $0.09 vs est net income of $0.05/shr

* Moody’s downgrades co’s unsecured senior debt to near junk status

Oct 25 (Reuters) - U.S. broker-dealer MF Global Holdings Ltd , led by former Goldman Sachs Group Inc chief executive Jon Corzine, posted a surprise second-quarter loss, as recent market volatility and higher costs took a toll on the company’s results.

On Monday, Moody’s downgraded MF Global’s senior unsecured debt rating to a notch above junk status, citing its exposure to European sovereign debt and increased risk appetite.

MF Global was asked by the industry regulator to boost its net capital following concerns about its exposure to European debt, according to a SEC filing last month.

As of Sept 30, MF Global maintained a net long position of $6.3 billion in a short-term European debt, including Belgium, Italy, Spain, Portugal and Ireland.

Macquarie analyst Ed Ditmire said the company’s Eurozone debt position has barely changed since the previous quarter and is “worrisome.”

However, the company said it curbed its proprietary trading activities mainly in equities and fixed income, amid volatile market conditions, that led to a 73 percent drop in revenue from trading for its own account.

“Reflecting the stressed markets in the quarter, we deliberately chose to reduce overall market exposure in most principal trading activities and focused on preserving capital and liquidity,” said CEO Corzine.

For the second quarter, the net loss attributable to common shareholders was $191.6 million, or $1.16 a share, compared with a loss of $94.3 million or 59 cents a share, a year ago.

On an adjusted basis, the company reported a loss of 9 cents a share.

Analysts, on average, were expecting the company to post a profit of 5 cents a share, on revenue of $301.4 million, according to Thomson Reuters.

Total revenue fell 2 percent to $499.7 million from the previous year.

The company’s shares closed down 3.5 percent at $3.55 Monday on the New York Stock Exchange.

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