NEW YORK (Bloomberg) — Bermuda-based MF Global Ltd., the world's largest broker of exchange-traded derivatives, reported a $71.1 million loss after a futures-trading scandal and said it would sell JC Flowers & Co. as much as $300 million in equity to pay off debt.

The net loss for the fiscal fourth quarter was 59 cents per share, compared with profit of $76.1 million, or 73 cents, in the same period a year earlier, the company said yesterday in a statement. The firm, which forecast a loss of between $55 million and $65 million on April 18, fell in New York trading.

Chief executive officer Kevin Davis, 47, has tightened risk controls after a $141.5 million trading loss in February and secured additional capital to pay off a bridge loan due later this year. MF Global fell 69 percent in the quarter, with most of the drop coming in the two days after the company reported its bad bet on wheat futures, which it said was unauthorised.

"In the near-term this looks modestly positive," Rich Repetto, an analyst with Sandler O'Neill & Partners, said in an interview. "Given this market, doing a deal at this price level is not unreasonable."

JC Flowers, the buyout firm run by former Goldman Sachs Group Inc. banker Christopher Flowers, will appoint two directors to MF Global's board in return for its investment. MF Global said yesterday it's seeking to refinance a $1.4 billion bridge loan and will use $350 million from a five-year revolving loan to pay down part of the debt. The company has $350 million due in June and an additional $1.05 billion that must be paid in December, according to a February 13 company filing.

The equity-linked securities will be convertible into MF Global shares at any time at an initial conversion price of $12.50 per share. MF Global, formerly the brokerage unit of Man Group Plc, the world's largest publicly traded hedge-fund manager, fell 93 cents, or 6.2 percent, to $14.05 in composite trading on the New York Stock Exchange.

Man Group built up the brokerage unit by acquiring assets from Refco Inc. when the New York-based futures broker went bankrupt in 2005, beating out JC Flowers for the acquisition.

"They outbid us for it fair and square and we have had a lot of respect for them ever since," Christopher Flowers said yesterday in an interview. He said the growth of brokerages in the commodities business is attractive and he has confidence in Davis's leadership. Flowers said he was convinced MF Global has addressed its risk-management issues.

"With a company like this you couldn't last remotely this long without being good at risk management," Flowers said. The company's trading loss was "unpleasant" and "unexpected," but "we think that's been corrected," he said.

MF Global dropped 45 percent in two days in February after the company said Evan Dooley, a broker in the Memphis office, had engaged in unauthorised wheat futures trades. Preliminary results from two outside reviews of its trading and risk controls identified a problem in its order-entry system that led to the bad trades, the company said April 18. The company hired more on-site managers in April to monitor trading and will restructure its risk-management department. A new chief risk officer will be hired to monitor trading and will report to Davis.

"There's no question the JC Flowers involvement with us is a massive vote of confidence," Davis said in an interview. Lazard LLC advised MF Global on the securities sale.

The company will be closing 10 to 15 US branch offices, with about half of those locations already shut, Davis said.

"We've decided to focus almost all our US efforts around our New York and Chicago offices," he said. "The impact on our business in terms of revenue is de minimis."

Expenses jumped 52 percent in the quarter to $488.3 million from $321.6 million a year earlier. The $141.5 million trading loss was recorded as an expense, according to the company's balance sheet. Excluding the trading loss, expenses rose 7.8 percent.

Revenue in the quarter fell 46 percent to $1.24 billion as interest income fell by more than $1 billion. On a net basis, revenue rose 10 percent to $413 million, the company said. Contract trading volume rose 38 percent to a record 594 million in the quarter. The company said last month it expected at least 37 percent volume growth to 590 million to 600 million contracts.

On an adjusted basis that excludes the trading loss and other items, the company said last month it expected pre-tax profit to be $75 million to $85 million. The actual figure was $60.9 million.

The US Attorney's Office in Chicago is investigating Dooley's trades and the Commodity Futures Trading Commission is collecting information and monitoring the situation, the US regulator said in February.