MF Global told S&P its capital position was strong
By Sarah N. Lynch
WASHINGTON (Reuters) - Just a week before futures brokerage MF Global filed for bankruptcy, the firm's chief financial officer told analysts at Standard & Poor's that its capital position had "never been stronger," according to the ratings agency.
The behind-the-scenes details about MF Global's dealings with McGraw Hill's Standard & Poor's came in a January 17 letter from the rating agency's managing director Craig Parmelee to lawmakers investigating the role that ratings agencies and risk officers played in the collapse of MF Global.
MF Global filed for bankruptcy on October 31 after investors and customers became rattled over the firm's $6.3 billion bet on European sovereign debt.
Congressman Randy Neugebauer, who chairs a House Financial Services investigative panel, is presiding over a hearing on Thursday to study the vigilance of the rating agencies, which did not significantly downgrade MF Global until just days before, or hours after, it filed for bankruptcy.
In the letter to Neugebauer, Parmelee said that MF Global's Chief Financial Officer Henri Steenkamp sent an email on October 24 to S&P saying that "MF Global's capital and liquidity has never been stronger" and that "MF Global is in its strongest position ever as public entity."
The email from Steenkamp to S&P analysts was sent on the same day the rating firm's competitor, Moody's Corp, downgraded MF Global to near-junk status. Steenkamp also made similar comments during an earnings call the following day.
A spokesperson for MF Global Holdings said Steenkamp's statement was "accurate at the time" it was written.
A spokesman for S&P declined to comment. Continued...