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A preliminary prospectus by MFGlobal hedge fund, which ex-NJ Gov Corzine heads, there is a clause that says an extra 1 percent will be paid on five-year notes “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 U.S. Senate prior to July 1, 2013.”

As weird as this looks it's actually a very reasonable rate of "conditional insurance premium" to entice the people who are concerned about the possibility of Corzine leaving the fund for Obama's post to still invest in the fund. The mechamism / instrument is a little unusual but not that much different from taking a "key man life insurance" policy by companies where their fate depends on one or few "key" persons (such as inventors or executives) essential to survival of the company.

The major difference between the two is that Corzine's "insurance" is conditional so that MFGH won't have to pay the premium upfront. It also means that they consider the possibility remote, but need to offer an incentive to possible investors who are concerned about the rumors of this very specific scenario. Apparently the bankers from Jeffries & Co., who worked on this bond deal, came up with the shrewd structure that allows the firm not having to pay the "insurance premium" unless the condition/event actually happened.

From Wall St. Stunned by Corzine's Obama Covenant - BL, by Tim Catts, Matthew Leising and Christine Harper, 2011 August 02

MF Global Holdings Ltd. (MF) took the cult of the Wall Street chief executive officer to a new level with a plan to sell bonds that pay a higher rate if Chairman and CEO Jon Corzine quits to accept a job from the U.S. president.
The futures broker is selling $300 million in five-year unsecured notes ..... < snip >
..... “That seems crazy" said William Larkin, a fixed-income portfolio manager who oversees $500 million at Cabot Money Management Inc. in Salem, Massachusetts, and has 22 years of experience. “I've never heard of something like this." ..... < snip >
..... Corzine's employment contract is written with a view to future government service. It stipulates that he'll be paid his $1.5 million retention bonus on a pro rata basis if he leaves to work for any “U.S. federal, state or local government" before March 31, 2014. Five senior Wall Street executives at rival firms, who declined to be identified because they weren't authorized to comment, expressed amazement at the bond offering's unique terms. ..... < snip >
..... “I can't say I've ever seen a provision similar to this one," said Alexander Diaz-Matos, an analyst at New York-based Covenant Review LLC, which analyzes bondholder protections. “Apparently Corzine is a big enough deal to the company that if he leaves, potential investors demanded a little extra protection." ..... < snip >

This is just a variation on the concept of CDS or interest-rate swaps, which is well understood on Wall Street and in financial circles. John Paulson and few others made billions of dollars using CDS betting against mortgage market CDOs / MBS which AIG's London's Financial Products division (mostly) had underwritten.