Wednesday, August 3, 2011

Is Geithner On His Way Out as Treasury Secretary?

Bruce Krasting spots an unusual clause in an MF Global note coming next week. Krasting explains:
MF Global is coming to market with $300mm of senior notes. By itself, this is a routine deal. But this one has some kickers to it that have me scratching my head. Jon Corzine is the CEO over at MF. Jon is ex Goldman and ex governor of NJ. A very powerful guy. He is also a solid Democrat and big supporter of Obama.
There is a unique feature in the MF Global deal. The interest rate on the bonds rise a full one percent if one conditions is met in the future. What is that condition?
The issue carries a notable “key man event” trigger, mandating a 100 bps increase in the interest rate if the company’s chief executive officer, Jon Corzine, is appointed by the President of the United States and confirmed for a role in the federal government before July 1, 2013.
Lawyers pore over bond deals. This one is no exception. As part of the due diligence someone must have asked Corzine how long he would be the CEO at MF. His answer must have been, “I’m staying until the President calls me with an offer”. The language in the bond deal has to mean that Corzine is already talking with the White House.
Of course, it could also mean that some potential note buyers were concerned that Corzine was leaving for Treasury, even though he is not, and the clause was put in to mollify the concerned.

Time will tell.


  1. Or might he be in line to become a Fed governor?

  2. Yeah But...Can the political terrorist Corzine master TurboTax?