Refco Not Done Deal
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The deal to sell the futures trading business of Refco Inc, to a Christopher Flowers led consortium is not a done deal. Firstly, Flowers has said that he is interested in buying the entire company, not just the regulated business. Interviewed by CNBC he commented, "we have an option to buy the rest of it and we're very interested in seeing if we can resuscitate all of Refco's businesses." On the other side, although JC Flowers and other consortium members have agreed a sale with a recommended bid of $768m (£438m), a formal auction has to be held. The Flowers consortium has bought on Texas Pacific Group, Silver Point Capital, MatlinPatterson, Global Advisers and Enstar Group. Included in the group are some of the biggest names in private equity. Potential competitors include UK hedge fund manager, Man Group. A Dubai government-backed consortium has been mentioned. JC Flowers has taken a punt on the futures trading arm. In particular that the business can be ring-fenced from legal claims on the unregulated business. Currently the futures trading arm remains outside the bankruptcy Refco Inc and subsidiaries put themselves into on Monday night. Also outside the bankruptcy is another regulated business, a separate securities broker. Legal matters centre on the accounting scandal which led to Refco's unregulated capital markets business run out of cash last Thursday. Refco Inc's, accounting had disguised a $430m debt owend by CEO Phillip Bennett (since repaid). A number of other legal matters are swirling around Refco Inc, not least for its auditors and Goldman Sachs. Goldman Sachs advised on Refco's IPO and is handling the auction of the distressed businesses. Also Chris Flowers and other consortium managers are ex-Goldman bankers.
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