(Bloomberg News) MF Global Holdings Ltd., the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy after making bets on European sovereign debt.

The New York-based firm listed total debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan. Its finance unit, MF Global Finance USA Inc., also filed, with debt of as much as $50 million and assets of as much as $500 million.

"The boards of directors of both entities authorized the filing of the Chapter 11 petition in order to protect their assets," the companies said today in a statement.

MF Global's board had met through the weekend in New York to consider options including a sale to avert failure, according to a person with direct knowledge of the situation. Following a record loss, MF Global was suspended today from doing new business with the New York Federal Reserve, according to a statement on the regulator's website. Trading in MF Global's stock was also halted.

MF Global declined 67 percent last week and its bonds started trading at distressed levels amid its disclosures of bets on European sovereign-debt. MF Global held talk with five potential buyers for all or parts of the company, including banks, private-equity firms and brokers, said the person, who asked not to be identified because the talks were private.

Record Loss

MF Global reported a $191.6 million quarterly loss on Oct. 25 and Moody's Investors Service and Fitch Ratings cut its credit rankings to junk.

The firm was getting advice from Evercore Partners Inc. as it sought buyers. Skadden, Arps, Slate Meagher & Flom LLP is representing the company as bankruptcy counsel in the case, which was assigned to Judge Stuart M. Bernstein.

The broker of commodities, derivatives, equity and foreign exchange had $7.2 billion of customer funds in segregated accounts as of Aug. 31, according to the Commodity Futures Trading Commission. It was one of 22 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York and is a member of more than 70 financial exchanges, according to its website.

Unsecured creditors include JPMorgan Chase & Co., as trustee for holders of $1.2 billion in debt, and Deutsche Bank AG, as trustee for holders of more than $1 billion in notes due in 2016 and 2018, MF Global said in court papers. JPMorgan itself holds less than $100 million of the debt, according to a person close to the New York-based bank, who spoke on condition of anonymity because the dealings aren't public.

Armin Niedermeier, a spokesman for Frankfurt-based Deutsche Bank, declined to comment.

MF Global's 6.25 percent notes due 2016, which traded at 43 cents on the dollar earlier today, fell to 35 cents after the bankruptcy filing, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds traded as high as 104 cents as of Sept.7.

MF Global's largest shareholders include Pyramis Global Advisors LLC, with FMR LLC as custodian, with 8.4 percent of the stock, and RS Investments in San Francisco, with Guardian Life Insurance Co. as custodian, with 7.8 percent, according to court papers. As of June 30, MF Global had two series of preferred stock, including 1.5 million shares issued to J.C. Flowers & Co.

MF Global, formerly part of Man Group Plc, has its roots in a sugar brokerage founded by James Man in England in 1793. MF Global became a public company in a 2007 spinoff. The unit was built up before the spinoff by acquiring the assets of bankrupt brokerage Refco Inc. in 2005.

Broker-dealers aren't eligible to file for Chapter 11 bankruptcy, and need to either sell assets, as Bear Stearns Cos. did in 2008 to JPMorgan, or liquidate, as did Lehman Brothers Holdings Inc.'s brokerage unit and Bernard Madoff's firm. Liquidations are overseen by the Securities Investor Protection Corp. so as to return or replace customer securities. SIPC, created under the Securities Investor Protection Act, insures losses of as much as $500,000 a customer in registered securities.

Corzine, who helped run Goldman Sachs from 1994 to 1999, had sought to transform MF Global into a midsize investment bank since arriving there in March 2010. He increased the firm's risk and used its own money to trade, including investments in European sovereign debt that rattled markets.

Buyers Sought

Corzine, 64, reached out to Goldman Sachs about selling all or part of the company, according to two people with knowledge of the firm's deliberations. Macquarie Group Ltd. examined MF Global's books, according to a person with knowledge of the situation. Paula Chirhart, a spokeswoman for Macquarie in New York, declined to comment.

Barclays Plc was among banks that looked at MF Global, another person said. Kerrie Cohen, a bank spokeswoman in New York, declined to comment.

State Street Corp., which is also reported to be a potential bidder, doesn't comment on rumors, Hannah Grove, a spokeswoman for the Boston-based firm, said in an e-mail.

"We're investing in the future of this business," Corzine said in a May statement that announced new hires in its commodities and derivatives areas. In August, the company sold $325 million in senior unsecured notes in order to repay part of its $1.2 billion revolving credit facility, according to past company statements.

In October, MF Global had its credit ratings cut by Moody's on concern that the broker wouldn't meet earnings targets and isn't sufficiently managing risk. Transactions in the debt of European governments hard hit by the region's sovereign debt crisis were among the issues cited by Moody's.

By Oct. 28, MF Global tapped the entirety of two bank lines, said three people with knowledge of the matter speaking on condition of anonymity since the move wasn't public. The company had said Oct. 25 that it had $1.3 billion in unused credit facilities, without giving a date for the tally.

MF Global increased net capital at the U.S. unit after the Financial Industry Regulatory Authority raised concern about the risks to its European debt portfolio, it said in September. MF Global owns $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt, the company said in an Oct. 25 presentation.

"We are confident that we have the resources, capital, liquidity and expertise to successfully manage our European exposures to their end date maturity of December 2012," Diana DeSocio, a spokeswoman for the broker, said in an Oct. 24 statement.

The case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).