Another news on Refco Refco may be shutting down one arm only but it certainly doesn't look good since it accounted for over 60% of its pretax profits in 2005..... http://www.marketwatch.com/news/sto...55A-4469-8594-2AD5FFF59855}&siteid=mktw&dist=
refco futures will have to be spun off, period. the firm at large is finished. the carving of the carcass is already being mapped out, with lawyers, bankers, and traders sequestered in some titty bar somewhere, I'd hazard.
Problem is that the pure clearing business is not that profitable. I read the Refco S-1 (IPO docs) again last night, their clearing business (Refco LLC, the FCM) generated revenue of around $950M ('04 numbers) and pre-tax profit of around $130M, that's around 14%, which is pretty good, since the average rates are around 10-12%. But this is still substantially lower than the 20-25% rate that an ibank generates. As I have noted in another thread, the only buyers will be either other FCMs (FIMAT, MAN) or foreign firms (HSBC, Fortis, come to mind). All the buyers won't pay much for the FCM operation. Merrill might be another potential buyer, as they bought PAX and Sage recently. Refco Capital Markets (RCM) does substantially better, as the prime brokerage and FX all entail hower margins. They did around ~$400M in '04, and generated $140 in profits, or around 35%, which is decent for a capital markets division. The trouble with this figure for RCM is that it can not be relied on for any transaction, as this is the business unit with all the problems (Maggio's fine, and today's account shutdowns). You would be hard pressed to find a buyer at this point (with all the accounting in limbo). There would be plenty of wolfs looking at the corpses if the opportunity presents itself, but none will be willing to pay without a substantial discount due to the accounting problems. Rather than selling the whole thing at a loss, TH Lee might be tempted to pump capital in (as they have plenty of cash) and trying to savage it themselves, maybe with a partner instead of selling the whole piece.
what might happen to the refco fx ass llc accounts will account holders get there money back ? anyone