Refco Files for Bankruptcy, Sells Futures Brokerage to Flowers
Oct. 18 (Bloomberg) -- Refco Inc., the broker reeling from a bad-debt scandal, filed for bankruptcy court protection and reached an agreement to sell its futures trading business to a group led by buyout firm J.C. Flowers & Co. for $768 million.
Christopher Flowers' New York-based firm is leading a buyout consortium that includes Enstar Group Inc., Silver Point Capital, MatlinPatterson Global Advisers LLC and Texas Pacific Group. The sale includes Refco LLC, Refco Overseas Ltd. and Refco Singapore Ltd, and other regulated futures units, the press release said. Refco applied for Chapter 11 bankruptcy for other parts of the business, the statement said.
Refco, the largest independent U.S. futures broker, is moving forward with the sale just a week after firing Chief Executive Phillip R. Bennett for hiding $430 million he owed the company. The sale to Flowers may be contested because the investment arm of Dubai's government and Blackstone Group LP, one of the world's biggest buyout firms, may try to trump the Flowers- led offer.
``Seeing that there is a bid that entertains the entire business concern, it should be seriously considered by the board and its advisers,'' said Raul Henriquez, 44, who runs an investment firm that has been a client of Refco's futures business for more than 20 years.
Greenhill & Co., a New York-based investment bank led by Robert Greenhill, becomes Refco's sole financial adviser. Refco said Goldman Sachs Group Inc., hired on Oct. 13, wasn't under contract to work for the company after a bankruptcy filing.
Rival Bids
Refco's units included in the sale deal in exchange-traded futures and are regulated by the Washington-based Commodity Futures Trading Commission.
Refco said its bankruptcy filing didn't include the regulated units such as Refco Securities LLC. It filed the so- called 8-K form today with the U.S. Securities and Exchange Commission.
Henriquez is the chief executive of Miami-based Hencorp, Becstone LC. Other clients are pressing Refco to consider the Dubai bid more seriously, people familiar with those discussions said. According to Carlos Abadi, a New York investment banker who says he's also involved in the Dubai bid, J.C. Flowers & Co. got preferential treatment because its founder, Christopher Flowers, 47, is a former Goldman partner.
``We don't have a strategic interest in J.C. Flowers or any of its funds,'' said Goldman spokesman Lucas van Praag. He declined to comment on Refco's plans. Refco spokesman Rob Solomon didn't immediately return calls seeking comment.
Dubai Bid
Henriquez said considering a competing bid from the Dubai group ``would eliminate many potential conflicts of interest.'' Abadi, 45, said the consortium offered $1 billion for all of Refco and was rejected.
Refco's other main units are Refco Securities, a broker- dealer overseen by the U.S. Securities and Exchange Commission, and Refco Capital Markets Ltd., an unregulated securities and foreign-exchange broker based in Bermuda.
Mark Winkelman will be chairman of Refco LLC. Winkelman was the head of J. Aron & Co., a commodities trading firm that Goldman bought in 1981. The business has since been folded into Goldman's fixed-income, currencies and commodities division.
Winkelman was co-head of the fixed-income business with Jon Corzine, until Corzine became Goldman's senior partner in 1994. Corzine is now Democratic U.S. Senator for New Jersey.
To contact the reporter on this story:Adrian Cox in New York at
[email protected] Last Updated: October 18, 2005 02:02 EDT 