Refco, Flowers, Abadi & A "set-up"??!!

Discussion in 'Wall St. News' started by CPTrader, Oct 17, 2005.

  1. This seems interesting and strange:

    Why would GS lockout Abadi from the bid as Abadi claims? Why would GS not aggresivley seek a bid for the entire REFCO INC instead of just the futures arm - REFCO LLC?

    Abadi has been aggressively attacking GS today in the media and is adamant he will sue if Flowers wins.

    I think the delay in announcing a definitive agreement is partly if not entirely related to this.

    Yoru thoughts/insights please?

    Refco Set to Sell Futures Broker to Flowers-Led Group (Update3)
    Oct. 17 (Bloomberg) -- Refco Inc., the futures broker facing insolvency because of a bad-debt scandal, said it's in ``advanced'' talks to sell part of the company to a group led by New York buyout firm J.C. Flowers & Co.

    Flowers, run by former Goldman Sachs Group Inc. partner Christopher Flowers, is negotiating to buy Refco's futures brokerage. Refco said in a statement today that it expects an agreement to be reached. No terms were disclosed.

    A deal for Refco, the largest independent U.S. futures broker, will ease concern about the impact of a collapse on financial markets. The New York-based company began shutting two of its three units after stunning clients and investors Oct. 10 with the revelation that former Chief Executive Phillip R. Bennett hid $430 million in bad debts.

    ``These situations demand immediate action,'' Richard Breeden, who was Securities and Exchange Commission chairman when New York-based Drexel Burnham Lambert Inc. failed in 1990, said in an interview. ``Customers can't wait and accept promises that things will be sorted out in days or weeks or months.''

    Refco's 9 percent bonds due 2012 surged 6 cents to 40 cents on the dollar, reducing the yield to 30 percent, the first gain in a week. The company's stock remains suspended on the New York Stock Exchange at 75 percent below the Oct. 7 price.

    A takeover would make Flowers' firm an immediate force in the futures market, which traded more than $1,000 trillion in contracts last year.

    Rival Bids

    Refco's futures business had $4.9 billion in customer funds at the end of May, ranking No. 8 behind banks such as Goldman and Citigroup Inc., according to the Commodity Futures Trading Commission. It includes Refco LLC, Refco Overseas Ltd. and Refco Singapore Pte., the company said.

    Flowers isn't buying Bermuda-based Refco Capital Markets, an unregulated securities and foreign-exchange broker. That unit may file for protection from creditors as early as today, a person familiar with the rescue effort said.

    Refco Capital Markets has about $3 billion of customer funds, according to Carlos Abadi, who runs Abadi & Co., a New York investment bank.

    Abadi said he's part of a group that offered $1 billion for all of Refco and was rejected by Goldman. The group includes Blackstone Group LP, one of the world's biggest buyout firms, and Dubai Investments, the investment arm of the Dubai government, two people involved in those discussions said.

    `Set Up'

    Any deal with Flowers would be ``a set-up'' because the negotiations are with his former colleagues at Goldman, Abadi said. In an interview, he pegged the Flowers-led offer for the futures brokerage at $750 million to $800 million.

    Goldman's head spokesman in New York, Lucas van Praag, called Abadi's remarks ``mystifying.''

    ``The company and its advisors are working hard on viable solutions,'' van Praag said. ``Anyone who wishes to make a proposal or discuss options is welcome to do so.''

    Abadi, 45, said Goldman denied his group access to due diligence on Refco. He plans to challenge any sale to a group led by Flowers in court.

    Calls and e-mails to Christopher Flowers weren't returned. Rob Solomon, a Refco spokesman in New York, didn't return calls.

    Refco's third main unit, Refco Securities, also isn't part of the talks with Flowers. Refco Securities, a broker-dealer that began to unwind positions last week, has about $62.2 million in bonds and other assets to back customer transactions.


    Flowers, 47, has worked the past 25 years in mergers and acquisitions, focusing on financial services companies. In 1988 he became Goldman's youngest partner since World War II.

    Flowers struck out on his own 10 years later, teaming up with Ripplewood Holdings LLC founder Tim Collins to take over the failed Long-Term Credit Bank of Japan Ltd. in March 2000. That transaction eventually earned as much as $7 billion for investors.

    Long-Term Credit was renamed Shinsei Bank Ltd. Flowers owns 6.5 percent stake, making him the largest individual shareholder.

    Regulators including the Commodity Futures Trading Commission stepped in Oct. 14 to help prevent a disorderly breakdown of Refco. Goldman, the world's No. 3 securities firm by market value, began seeking bids as Refco's chances of survival dwindled.

    Greenhill Hired

    Refco hired Greenhill & Co. to advise on a possible sale of its futures arm, the people familiar with the discussions said. The New York-based investment bank is working alongside Goldman.

    Also involved in the sale talks were Man Group Plc, the world's largest hedge-fund company; Fimat Group, a unit of French bank Societe Generale; Citigroup Inc., the biggest U.S. bank by assets; and JPMorgan Chase & Co., the third biggest, according to people briefed on the negotiations. Man Group denied in a statement today that it was in talks with Refco.

    JPMorgan spokesman Adam Castellani and Citigroup spokeswoman Danielle Romero-Apsilos, both based in New York, declined to comment, as did Fimat spokeswoman Siobhan O'Hare in London.

    Refco is the largest provider of customer-transaction volume to the Chicago Mercantile Exchange, the biggest U.S. derivatives exchange. The company processed 654 million contracts in the fiscal year ended Feb. 28, more than those traded on the Chicago Board of Trade, the Chicago Board Options Exchange, or the New York Mercantile Exchange in the same period.

    Client Deposits

    Earlier today, Refco (Singapore) Pte., the local unit of Refco Inc., said customers had reduced futures trading and withdrawn funds. Refco Sify Securities India and Refco Capital India Pvt., two Indian affiliates, were told ``not to increase their exposures'' until the scope of Refco's crisis is known, the Mumbai stock exchange said Oct. 15.

    Investment banks including JPMorgan, Lehman Brothers Inc. and Deutsche Bank AG discussed meeting today to ensure an orderly settlement of Refco's positions, according to a person familiar with those talks, who spoke on condition of anonymity.

    U.S. Attorney Michael Garcia said Oct. 12 that Bennett used a series of loan agreements to keep hundreds of millions of dollars in uncollectible debts hidden. The scheme deceived investors in Refco's $583 million August initial public offering, led by Credit Suisse First Boston, Goldman and Charlotte, North Carolina-based Bank of America.


    ``The underwriters are facing legal liability,'' said Robert Heim, a former SEC enforcement attorney and now a partner at Meyers & Heim LLP in New York, in a phone interview on Sunday. ``They will be getting sued for this.''

    Bennett, a U.K. native who graduated with a master's degree from Cambridge University, was arrested last week. He was freed on home detention after being ordered to wear an electronic bracelet and to post a $50 million bond, plus $5 million in cash.

    CSFB, Bank of America and Deutsche Bank underwrote Refco's $600 million bond sale last year. They also arranged an $800 million loan, which had $644 million outstanding on May 31.

    Thomas H. Lee Partners LP, the Boston-based buyout fund, has the biggest equity stake in Refco.

    To contact the reporters on this story:
    Adrian Cox in New York at
    Last Updated: October 17, 2005 14:40 EDT
  2. I like Refco service, pricing and breadth of services. But... would I like to give my money to the Goldman guys??? Ugh....

    Besides, "Flowers Futures and Options".... sounds gay doesn't it
  3. nassau


    What is interesting is that RFX is halted for x no. of days.
    A few days later it is sold ? , the stock gets delisted by the NYSE and starts trading under a new symbol as if there was a completed merger by a group thats member(s) has ties back to the initial companies associated with the IPO..

    What happened to the halt and the proper time to do proper due diliguence...or was it already being done..
    To allow a proper opportunity to be purchased for fair market value
    Don't know about your past business experiences but I have not seen lawyers and accountants complete this type of diliguence in this time frame...
    or has the gov't intervened behind the scene?

    This is really dirty!

  4. Really dirty. And goldman behind all of it.
  5. get out your tinfoil hats.
  6. nassau


    Interesting comment in the news on sqwack box...

    they are saying that the Refco situation did not effect many people..just a few big boys got hurt and they should of know better?
    they don't believe the normal day trader type of person got hurt at all....?
    What a joke, they are now trying to down play the situation and that Refco did not really make much difference in the big picture.

    Yesterday it was how much business and all its impact worldwide was effecting the markets..

    Looks like I will wait a short time and then look to go after errors and ommissions somewhere...

    any longs that would like to come for the ride...please contact me.

  7. I've been amazed this whole time how little attention is being paid to the almost 4 bill in equity value thats been wiped out in a week. Noone truly cares as long as Refco customers and secured debt holders get out ok and the big boys help out thier friends with the fire sale of the only remaining assets. Truly insane. And the street wonders why investors have no confidence in the us mkts.
  8. LOL!! :D

    How about Floco?
  9. nassau


    Want to know another corker.
    Try and get the regulatory bodies to act. Prior I had an issue and contacted the SEC.
    If you contact the SEC, they tell you that you first must contact the NASD and if they feel there is a just call to further look into the matter they will contact the SEC. It takes years and lots of money with very little action or restitution.

    A few associates and myself lost close to 3million and todate nothing that I have been able to see is done. These guys have million dollar homes in the USA and overseas, Mercedes, one guy has several planes.
    The several persons in question, still run accounts through brokers, now have a broker (in trust)?, have had run ins with the SEC prior and got a slap....hell steal millions..and pay a small fine...

    You can bet your know that the brokers are having a field day with the traders on margin calls...They have the opportunity to pick and choose what stocks to liquidate to their advantage.
    They don't have to even liquidate RFX if they choose they know that position is available for picking any time they want.

    This has just started to get dirty.

  10. Glad they didn't pick a specific flower such as tulip
    #10     Oct 18, 2005