NEW YORK (Bloomberg) — Bermuda-based MF Global Ltd., the derivatives brokerage that lost $2 billion in market value since February, is seeking to sell $200 million of convertible debt to private equity firms, according to two people familiar with the talks.

MF Global, led by chief executive officer Kevin Davis, has approached at least three firms to buy the debt, said one of the people, who asked not to be named because the discussions are private. Shares of MF Global plunged after a trader lost $141.5 million and investors became concerned that customers would withdraw their money.

"This should certainly help calm fears," said Robert Webb, a finance professor at the University of Virginia. "A lot of the downside has not been justified at all. You have a market rife with rumours and MF Global was the unfortunate victim of some of these."

A convertible debt sale would be a turnabout for Davis, 47, who rejected the idea when the the firm announced its trading loss in late February.

"We have no plans to issue convertible debt," Davis said on a February 28 conference call with analysts. "We would regard that as being a last resort, and we do not currently believe that we will need to do so." MF Global, the former brokerage unit of hedge fund Man Group Plc, is being advised by Lazard Ltd., said the people, who also declined to name the private equity firms. MF Global spokeswoman Diana DeSocio declined to comment, as did Lazard spokeswoman Judi Mackey.

MF Global said on April 18 that it was evaluating a "wide range of financing alternatives". The company has $350 million in debt due in June and another $1.05 billion due in December, according to a February 13 company filing.

Convertible debt pays interest until a company's shares rise to a certain price, at which point the notes convert to stock. MF Global, spun off in an initial public offering last July, has struggled to surpass its $30 IPO price.

The stock averaged $27.95 through December 31. It jumped 5.7 percent on Friday to $12.89 in New York Stock Exchange composite trading.

The broker's troubles began in February, when Evan Dooley, a trader in the firm's Memphis office, lost $141.5 million in what the company characterised as "unauthorised" wheat futures trades. MF Global shares fell 45 percent in two days after the company announced the loss on February 28.

Two weeks later, on March 17, MF Global shares plummeted 65 percent on concern that a run at Bear Stearns Cos. would spread. Bear Stearns agreed last month to be acquired by JPMorgan Chase & Co. for $10 a share in a deal brokered by the Federal Reserve.