Refco Securities LLC frozen for 20 days, to be shut down

Discussion in 'Wall St. News' started by buzzy2, Oct 14, 2005.

  1. I agree that the original REF & Co. was a good firm, and the core of that futures business is still very good. Hindsight is 20/20, I would say, but the original Refco became a spring board for Bennett, which used the Refco brand name to go on a bit of an acquisition spree (Lind-Waldock, CIS, etc, to name a few), which built Refco into the multinational firm today. However, like Ebbers at Worldcom and Kozlowski at Tyco, both of whom are notorious for acquiring companies as well, Bennett, it seems, have commited alleged accounting fraud in the process.

    I view the Refco in 2004 (in hindsight again) as an amalgamation of the pieces that Bennett have acquired since he took over, not as the original REF & Co. So when I feel bad about Refco, I do so with a whiff of nostalgia, that's all.
     
    #11     Oct 14, 2005
  2. That's all true but I'm really thinking that the original problem debt did come from customers they carried for too long. They could have solved by selling out at a much lower valuation.
     
    #12     Oct 14, 2005
  3. gwb-trading

    gwb-trading

    #13     Oct 14, 2005
  4. nkhoi

    nkhoi

    "Refco's 9 percent notes due 2012, today's most actively traded bond, dropped 12 cents on the dollar to 28 cents, pushing the yield to 41 percent, according to Trace, the bond-price reporting system of the NASD. That means investors are betting that Refco is riskier than Delphi Corp., the auto-parts maker that filed for bankruptcy on Oct. 8. "

    Apex, is this free money?
     
    #14     Oct 14, 2005
  5. Wow Apex Capital. I thought I had an arrogant side to me but this makes me look like an angel.

    This is from DowJonesNewswires. I'm sure you'll consider them pathetic morons too though:

    ( DJ ) 10/14 02:47PM =DJ Refco, What It Does And Why It's In Trouble: An Explainer
    By Michael Rapoport
    Of DOW JONES NEWSWIRES


    ...Refco's three major operating units are Refco LLC, Refco Securities LLC and
    Refco Capital Markets Ltd. Refco LLC is a registered futures commission
    merchant, regulated by the Commodity Futures Trading Commission, and thus far
    appears to be the least hurt by this week's troubles. Refco said Thursday that
    Refco LLC's capital has been "substantially unaffected" by the week's events
    and that business there "is being conducted in the ordinary course."

    The other two have more serious problems, as the week's revelations have
    shaken the market's confidence in Refco and apparently caused some trading
    partners to stop doing business with the company.
    Refco said Refco Securities, a broker-dealer regulated by the Securities and
    Exchange Commission, is unwinding its proprietary and client positions, in
    seeming contradiction to the company's assurances Thursday that the business
    was all right.
    Refco Capital Markets, an unregulated business based in Bermuda
    which provides prime-brokerage services to hedge funds, has been shut down for
    15 days over concerns that it doesn't have adequate liquidity.
     
    #15     Oct 14, 2005
  6. Weasel

    Weasel

    Why are there so many thieves connected to the hedge fund world?
     
    #16     Oct 14, 2005
  7. spreadgod, could you please post the entire DJ NEWSWIRE story you cited above.

    THX!
     
    #17     Oct 14, 2005
  8. Yea no one here is greedy either just a bunch of innocents.
     
    #18     Oct 14, 2005
  9. ( DJ ) 10/14 02:47PM =DJ Refco, What It Does And Why It's In Trouble: An Explainer
    By Michael Rapoport
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)--The scandal at Refco Inc. (RFX) has dominated the news
    this week, but it's still confusing to many market-watchers. In part, that's
    because Refco operates in a part of the market many investors never see, in
    part because it's hard to tell the different "Refco" entities apart without a
    scorecard.

    So here's the scorecard - an explanation of the various parts of Refco, what
    each does and where each stands in the wake of the mess at the company, in
    which Refco Chief Executive Philip R. Bennett has been charged with concealing
    the fact that an entity he controlled owed Refco hundreds of millions of
    dollars. The company says its financial statements back to 2002 should no
    longer be relied upon.

    As it says in its Securities and Exchange Commission filings, Refco Inc. -
    the parent company, the entity whose shares are publicly traded - has two main
    businesses: derivatives brokerage and clearing, and prime brokerage/capital
    markets.

    The derivatives segment provides trading services for customers for
    derivatives contracts tied to interest rates, foreign currencies, commodities
    futures and many other items - they're widely traded in by both speculators
    and those seeking to hedge risk.

    Refco is one of the biggest players in this market; in fiscal 2005, which
    ended in February, the derivatives segment generated $971.4 million in
    revenue, out of the company's total of $1.3 billion. It also generated $134.5
    million in operating income.

    The prime brokerage/capital markets segment provides trade execution and
    processing, clearing, securities lending and other services in the
    fixed-income and foreign-exchange markets. In fiscal 2005, it produced $404.1
    million in revenue and $137.5 million in operating income.

    Refco's three major operating units are Refco LLC, Refco Securities LLC and
    Refco Capital Markets Ltd. Refco LLC is a registered futures commission
    merchant, regulated by the Commodity Futures Trading Commission, and thus far
    appears to be the least hurt by this week's troubles. Refco said Thursday that
    Refco LLC's capital has been "substantially unaffected" by the week's events
    and that business there "is being conducted in the ordinary course."

    The other two have more serious problems, as the week's revelations have
    shaken the market's confidence in Refco and apparently caused some trading
    partners to stop doing business with the company.

    Refco said Refco Securities, a broker-dealer regulated by the Securities and
    Exchange Commission, is unwinding its proprietary and client positions, in
    seeming contradiction to the company's assurances Thursday that the business
    was all right. Refco Capital Markets, an unregulated business based in Bermuda
    which provides prime-brokerage services to hedge funds, has been shut down for
    15 days over concerns that it doesn't have adequate liquidity.

    One additional entity with "Refco" in its name isn't a Refco Inc.
    subsidiary, but may be the source of all the company's problems. Refco Group
    Holdings Inc., which is controlled by Bennett, is the entity that the company
    says assumed $430 million in uncollectible debts that other parties had owed
    Refco.

    Federal prosecutors say Bennett committed fraud by hiding from investors the
    fact that he owed Refco the money. While the debts were carried on Refco's
    books as a receivable, they weren't disclosed as a related-party transaction,
    as required, and prosecutors say Bennett engineered a series of quarter-end
    transactions designed to make it seem like the money was owed to Refco by
    someone else.

    -By Michael Rapoport, Dow Jones Newswires; 201-938-5976;
    michael.rapoport@dowjones.com

    (END) Dow Jones Newswires
    10-14-05 1447ET
    Copyright (c) 2005 Dow Jones & Company, Inc.
     
    #19     Oct 14, 2005
  10. plugger

    plugger

    Bottom line, does Refco and any of its subsidiaries survive?
     
    #20     Oct 14, 2005