Moody
Credit rating agency Moody’s Investors Service said late Thursday it downgraded the long-term issuer rating of MF Global Ltd. because of a $141.5 million loss tied to unauthorized trading.
Moody’s (MCO) cut the rating to "Baa1" from "A3."
The Bermuda-based broker said Wednesday morning it discovered Evan Dooley, a trader at the company’s Memphis, Tenn., branch, trading wheat contracts in amounts that exceeded how much he was allowed to trade.
MF Global (MF) said systems in place that should have blocked the trading failed. MF Global fired Dooley and liquidated the contracts, leading to a loss of $141.5 million.
The failure of MF Global to have sufficient systems in place to block such trades "represents a serious breakdown of risk controls," Moody’s said in a statement free credit report instantly. Moody’s had previously considered risk management one of MF Global’s biggest strengths.
The ratings cut also was partially the result of MF Global being unable to refinance $1.4 billion in bridge loans with permanent long-term capital.
Moody’s said MF Global was placed on review for another possible downgrade.
Filed under: money by Finance Boss