Futures and options broker MF Global Ltd. said Friday a bank syndicate has agreed to provide a $450 million credit facility that will be used to refinance a bridge loan it received to go public.
The company also disclosed two pending investigations in a regulatory filing and said it has set up a reserve to cover potential penalties from those probes and others.
The company said when the credit facility closes, it will be the last step in refinancing a $1.4 billion bridge loan. The company took out the loan in connection with its initial public offering and separation from Man Group PLC in July 2007.
MF Global has already said it will repay the rest of the loan, in part, with $350 million from an existing five-year liquidity facility, which will be used to fund the bridge loan payment scheduled to be paid Friday.
The company will also use $300 million from a sale of equity-linked securities and $300 million of excess funds currently held by the company.
MF Global said the new credit facility will have a two-year maturity.
The refinancing is expected to be completed by the end of July.
The company also said it recently established a $10 million accrual to cover any civil monetary penalties related to a previously disclosed unauthorized trading incident in February.
According to a filing with the Securities and Exchange Commission, in that incident a broker trading for his own account in a Tennessee branch office ordered unauthorized trades that resulted in a loss of $141 million. Since the trades were not authorized and the broker could not pay for them, the company said it was required to pay the money. That broker has been fired, the company added.
The company said the accrual will also be used to cover two other pending investigations before the Commodity Futures Trading Commission.
In the first, two employees received a "Wells notice" from the staff of the division of enforcement of the CFTC, relating to two trades that the company executed in 2004 for a customer and then sent to the New York Mercantile Exchange.
In the SEC filing, the company said the commission believes MF Global submitted information to the exchange that falsely represented the dates on which the trades occurred. The company said it disputes those allegations.
According to the filing, in the second incident, it is cooperating in an investigation by a New York grand jury in connection with the U.S. Attorneys Office. The investigation centers around trading by a market-making energy trader at the Bank of Montreal who allegedly mismarked his book.
MF Global said one of its brokers did business with the broker and used bid and offer prices sent to him by the trader for forward over-the-counter trades.
The company said it is not a target of the grand jury investigation, but it did receive a Wells notice from the CFTC against the broker under anti-fraud provisions.
The SEC is involved in that investigation, the company said.
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