NEW YORK (Bloomberg) — Bermuda-based MF Global Ltd.'s long-term issuer rating was cut one level to Baa2 by Moody's Investors Service because of declining trading volume and lower client balances at the derivatives broker.

About $360 million of debt is affected, New York-based Moody's said on Friday in a statement. Still, Moody's said the broker's business has stabilised and changed its outlook for the ratings to stable from negative.

MF Global has lost 90 percent of market value in the past year following a $141 million trader loss, missed earnings and confusion over financing plans to pay debt. The company's $150 million in preferred stock was downgraded to Ba1, one step below investment grade. Moody's cut $210 million of nine percent convertible bonds due in 2038 to Baa2, the second-lowest level of investment grade, from Baa1.

"The current uncertainty in the financial markets means that the probability of a more severe contraction in client activity exceeds the likelihood of a speedy recovery," Alexander Yavorsky, a Moody's analyst, said in the statement.

Changes in risk management, avoidance of illiquid assets, and a leading market share in the derivatives brokerage industry will allow MF Global to "return to stronger profitability when market conditions improve in the long term," Moody's said.

MF Global had $7.7 billion in customer segregated funds as of November 30, down from $10.4 billion as of January 31, according to the US Commodity Futures Trading Commission. The former brokerage unit of Man Group Plc, MF Global earns fees executing trades and acting as a clearinghouse by processing transactions to ensure the delivery of contracts.

The company last year sold $300 million in preferred shares and notes to the public, and sold as much as $300 million in convertible shares to buyout firm J.C. Flowers & Co. to pay off debt.

Michael Roseman was appointed as chief risk officer in September after Evan Dooley, a former broker for the firm, lost $140 million in wheat trading. The trades are being investigated by the CFTC and the US Attorney's Office in Chicago and have led to several shareholder lawsuits.

"Although this process is still ongoing, management's commitment to improving risk management, and the investments that have already been made, are a positive offset to the vulnerabilities revealed by last year's risk management failure," Moody's said.