The only way anyone at the unregulated gets his money is through a deal with someone who purchases the accounts who would require a time commitment and a volume minimum and then that new firm would make the customer whole. So if you stay for a year and do x amount of contracts you will be made whole at that point. Leave early or don't go and you get zip. If they get $1 billion for this thing and the bank debt is around 500 million and the unsecured bonds 300 million that leaves 200 million plus whatever cash is lying around in the other entities. After legal fees (100 Million?) and other liquidation costs, unsecurd customer accounts will have maybe $200 million. Add in the class action lawsuits and it will be years before you see anything if anything. The guy trading the stock who thinks he is gonna get something or new shares is very misguided. Equity will get dick. Just my reading of the situation.
Interactive Brokers Withdraws Refco Bid, People Say (Update2) Nov. 10 (Bloomberg) -- Interactive Brokers Group LLC, one of five bidders for the assets of bankrupt U.S. futures broker Refco Inc., withdrew its offer, said two people familiar with the auction. The departure of Interactive leaves Man Group Plc, the world's biggest publicly traded hedge fund manager, a group led by the Dubai government and New York-based buyout firm J.C. Flowers & Co. among the remaining bidders for Refco assets. Refco yesterday disqualified Alaron Trading Corp., a Chicago- based futures trader. The auction may result in an offer of as much as $1 billion, said Alaron Managing Partner Gary Weber. Refco's auction follows an Oct. 17 bankruptcy filing caused by the disclosure that former Chief Executive Officer Phillip Bennett hid $430 million of debt. The auction began yesterday in bankruptcy court in Manhattan and Refco may seek court approval for a sale as early as today. Interactive, based in Greenwich, Connecticut, had made the highest publicly disclosed offer, an $858 million bid for Refco units. The company won't comment on the auction because ``it wants to respect the confidentiality agreement through the entire process,'' Interactive spokeswoman Isabelle Clary said today in an interview. Interactive Chairman Thomas Peterffy said on Oct. 24 that Refco is ``more desirable to us than to anybody else.'' Futures Trading With 200,000 customer accounts and 2,400 employees, Refco was the largest broker on the Chicago Mercantile Exchange before it filed for bankruptcy protection last month. The auction will give Refco's creditors, owed $16.8 billion as of Aug. 31, an indication of how much they're likely to recover. Refco's bonds have been advancing on speculation the prospects for repayment are improving and yesterday closed at 77.5 cents on the dollar, up from a low of 40 cents on Oct. 13. Refco would give the buyer an opportunity to expand their futures businesses. Trading in futures, or agreements to buy or sell assets at a set date and time, rose 31 percent globally to $4.5 trillion a day in 2004, according to data compiled by the Bank for International Settlements. for International Settlements. -- Editor: Serkin (tbq) To contact the reporter on this story: Ann Saphir in Chicago at asaphir@bloomberg.net Last Updated: November 10, 2005 07:59 EST
I concur. The debate seems to be over the treatment of the customer accounts; are they assets of Refco or the account owners?
Man Group Wins Bidding War to Acquire Solvent Remnants of Refco for $282 Million. In a statement, Man Group said it would also assume $37 million of Refco debt and another $4 million in "other consideration."
Refco Auction Became 'Absolute Theater' Intense 21-Hour Bidding Process Provided a Showcase for Strategy By PETER A. MCKAY Staff Reporter of THE WALL STREET JOURNAL November 12, 2005; Page B5 Stephen Feinberg helped take the auction for Refco Inc.'s main commodity-brokerage unit into overtime, then end it. The founder of hedge fund Cerberus Capital Management LP, Mr. Feinberg spent the last few hours of a 21-hour marathon upping the ante with the only other competitor remaining, Man Financial Inc. When Mr. Feinberg finally declined to raise his bid yet again a little after 7 a.m. in New York Thursday, he ended a grueling slog that involved dozens of bleary-eyed attorneys, bankers, executives and office staff. The auction, in which Man Financial, a unit of London hedge-fund manager Man Group PLC, agreed to pay $323 million for Refco's flagship commodities and futures trading business, was among the most anticipated chapters in Refco's swift meltdown, but not the last: Friday, Refco unveiled plans to sell more than 15,000 customer accounts from a business that allows individuals to trade foreign currencies. The buyer is Forex Capital Markets LLC, which Refco also owns a 35% stake in. As part of the deal, Refco will sell that stake back to Forex Capital Markets. The total value of the transaction is $110 million, including cash, some customer liabilities and debt, Refco said. The sale of Refco's main futures brokerage unit, however, took place behind closed doors at the slick Times Square offices of the law firm Skadden, Arps, Slate, Meagher & Flom LLP, which represents Refco. People present described the auction as a mostly cordial but especially intense contest unlike any they had experienced on Wall Street, where the carcasses of troubled firms are often divvied up. "It was absolute theater," says Earl Nemser, vice chairman of Interactive Brokers Group LLC, another bidder. Mr. Nemser and other participants declined to be quoted in detail about the auction, citing confidentiality agreements with Refco. Refco's troubles surfaced Oct. 10, when the brokerage firm disclosed that its then-Chief Executive Officer Phillip R. Bennett had hidden $430 million in bad debts from the company. He was subsequently arrested, Refco filed for bankruptcy protection for its unregulated trading operations specializing in over-the-counter derivatives, and customers began fleeing all its trading units. The regulated unit Refco LLC, which was once the country's largest independent futures brokerage, was not covered by the initial bankruptcy filing. It remained as a crown jewel the company could unload to raise money to repay scores of creditors. Refco did so in an auction that was run privately by Refco advisers but still subject to a federal bankruptcy-court judge's approval since proceeds would go to creditors of the bankrupt operations. Skadden attorney J. Gregory Milmoe said the auction started around 10 a.m. Wednesday. There were five suitors: Man, Cerberus, Interactive Brokers, the private-equity firm J.C. Flowers & Co. and a consortium of investors from the oil rich state of Dubai and Marathon Asset Management LLC, a New York money manager. But the neutral territory wasn't traversed until around 5 p.m. Bankers from Refco adviser Greenhill & Co. and Mr. Milmoe, who acted as an auctioneer, decided to open the in-person bidding with a bid from Man valued at over $40 million. With a minimal incremental increase of $2 million required for each subsequent bid -- a relatively small change -- there was a lot of room for one-upping, and indeed some 75 offers and counteroffers were made over the course of the evening. Around midnight, J.C. Flowers & Co., represented by its head, former Goldman Sachs banker Christopher Flowers, dropped out. Soon after, Mr. Nemser and other Interactive Brokers representatives left without ever raising the initial bid they submitted in writing. "We came to the conclusion that the differences in culture and business models were too great," according to a statement from company Chairman Thomas Peterffy. By 2 a.m. Thursday, Mr. Feinberg had arrived to oversee Cerberus's efforts himself, in a contest that was down to his firm, Man, and the Dubai/Marathon group, which had the largest contingent present, about 25 representatives. Around 4 a.m., there were 80 people hashing out the three remaining bids in the shared conference room. "Seeing that many people working on this deal at that hour was surreal," one participant says. The Dubai/Marathon group dropped out around 4:30, with the Refco units' valuation hovering around $250 million. That left just Man and Cerberus. Since the early 1990s, Cerberus has been building a reputation for handling bailouts. A Refco acquisition might have burnished that record, but was not to be. Around 7:15, Mr. Steinberg, who as a student at Princeton listed chess among his hobbies, acknowledged checkmate.