MF Global Holdings Ltd. plans to sell bonds with an interest rate that will rise if Chairman and Chief Executive Officer Jon Corzine receives a federal appointment from President Obama.
The futures brokerage is selling $300 million of five-year senior unsecured notes to repay a bank line and for general corporate purposes, according to a person familiar with the offering, who would not be identified because terms aren't set.
The coupon will increase 1 percentage point if Corzine is appointed and confirmed by the Senate before July 2013, MF Global said Tuesday in a regulatory filing.
Corzine, the former governor of New Jersey, helped run Goldman Sachs Group Inc. from 1994 to 1999 and served in the Senate from 2001 to 2006.
Since joining MF Global last year, he's taken more risk with the firm's money to remake the broker into a midsize investment bank by 2015 and sought to change its capital structure to reduce borrowing costs.
"He's such a big part of the turnaround story you'd probably be a bit worried about him leaving," says Christopher Allen, an exchange and brokerage analyst with Evercore Partners Inc.
Allen says Corzine has been the subject of speculation for Washington postings, including Treasury Secretary or an economic advisor to the White House.
His $1.5 million retention bonus would be paid on a pro rata basis if he leaves to work for any "U.S. federal, state or local government" before March 31, 2014, according to Corzine's employment contract.
The interest rate increase will reverse under the so-called key-man clause if MF Global is upgraded to at least A3 by Moody' Investors Service Inc. or an equivalent A-minus by Standard & Poor's Corp. after a departure by Corzine, according to the regulatory filing.
"There aren't that many former senators that are running public companies that are in the middle of a turnaround," says Niamh Alexander, an analyst at Keefe Bruyette & Woods Inc. "This is probably a concern that a few key investors had, and this is how they addressed it."
Corzine has presided over a 13% rise in MF Global's share price in the year through Monday. It was named a primary dealer by the Federal Reserve Bank of New York and has hired more than 80 salespeople and traders this year.
