You know investors love the job you're doing running a company when they demand a much higher interest rate if you leave.
MF Global Holdings has come up with a novel way of getting a bond deal done amid speculation that the futures brokerage company's chief executive, Jon Corzine, may be heading out the door to take a U.S. government job: If he does, the interest rate on the bonds jumps sharply.
The story, according to Bloomberg News, is that Mr. Corzine has done such a good job of raising revenue while driving down costs that the company offered that if he leaves in the next couple years the interest rate on the five-year bonds it is selling rises by a full 1 percentage point. Mr. Corzine, a former Goldman Sachs CEO and New Jersey governor, can't go just anywhere, however.
The clause only kicks in if he is named to a federal job by the President in the next two years.
"The interest rate applicable to the notes will be subject to an increase of 1.00% upon the departure of Mr. Corzine as our full time chief executive officer due to his appointment to a federal position by the President of the United States and confirmation of that appointment by the United States Senate prior to July 1, 2013," MF Global said in a filing. (That's available here.)
That represents a jump of as much as one-third in the interest rate. MF hasn't said what the coupon will be, but it's unlikely to be much more than 3 per cent.
Five-year BBB-rated corporate bonds, which is what the MF notes are expected to be rated, are currently offering yields of about 3 per cent, according to Bloomberg data.