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.
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.
More press..... Refco Is Shutting Biggest Unit, SEC Bars Withdrawals http://www.bloomberg.com/apps/news?pid=email_us&refer=home&sid=ammNOjqx9XaQ
"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?
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.
( 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.