Man Group Wins Refco Auction for Broker's Assets, Refco Says
Nov. 10 (Bloomberg) -- Man Group Plc, the world's biggest publicly traded hedge fund manager, won an auction for the regulated assets of bankrupt futures broker Refco Inc., said Sandra Sternberg, a spokeswoman for Refco in New York.
London-based Man Group's Man Financial brokerage unit outbid Interactive Brokers Group LLC; a group led by the Dubai government; New York buyout firm J.C. Flowers & Co. and Cerberus Capital Management LP. Yesterday, Alaron Trading Corp. was disqualified from bidding after it failed to meet requirements.
``As an existing market participant, they'll be able to quickly integrate the customer base,'' said Dennis Dutterer, former chief executive of Chicago-based Clearing Corp., which guarantees futures transactions at exchanges.
Refco is selling its assets to help pay debts after filing the 14th-largest bankruptcy in U.S. history following disclosure that former CEO Phillip Bennett hid $430 million of debt.
Refco, which declared bankruptcy Oct. 17 and owes creditors about $16.8 billion, plans to present the winning bid to bankruptcy judge Robert Drain today. If he approves the sale, Refco said in a filing that it plans to liquidate its U.S. futures business under federal bankruptcy law, a sale the judge also needs to approve.
Several customers including investment funds controlled by Jim Rogers, George Soros's former partner, filed objections to the sale agreement yesterday, arguing Refco has no right to block them from trying to collect the funds that have been frozen in their accounts. Under the proposed sale terms, customers and creditors are restricted from pursuing claims.
Customer Lawsuits
``To relegate all potentially injured parties to look solely to the sale proceeds for restitution and damages of what may amount to one of the largest U.S. corporate scandals and otherwise absolve potential defendants of any liability is unconscionable and must not be sanctioned by this court,'' Ellen Moring, a lawyer representing the Rogers funds, said in court papers.
Rogers Raw Materials Fund L.P. and Rogers International Raw Materials L.P. have sued to recover $362 million in accounts held at Refco Capital Markets Ltd. Nine customers have filed lawsuits seeking the return of more than $840 million.
Bawag P.S.K, an Austrian bank that's owed $234 million, along with AQR Absolute Return Master Account L.P., Currenex Inc. and a group of more than 40 additional creditors also objected to the sale on similar terms, according to court documents.
Creditors
Refco lawyer J. Gregory Milmoe of Skadden, Arps, Slate, Meagher & Flom said last week his firm contends that customer accounts are unsecured debt, not client property. If Judge Drain determines those accounts are Refco debt, Rogers and the other customers will be treated as unsecured creditors. In large bankruptcy cases, unsecured creditors typically receive about 40 cents on the dollar for their claims.
Interactive last month offered the largest publicly disclosed bid, at $858 million. The government of Dubai and California billionaire Ronald Burkle, 52, together offered $828 million.
J.C. Flowers submitted a bid, Refco said in its filing. Cerberus told Refco before last week's deadline that it planned to bid, according to a person familiar with those discussions.
Refco's 9 percent notes maturing in 2012 traded at 77.5 cents on the dollar yesterday, up from 40 cents on Oct. 13, as bondholders bet Refco will be able to raise enough money in the auction to make good on their debts. The yield has halved to 14 percent in that time. Before the fraud probe, Refco's bonds traded at 109 cents and yielded 7 percent, according to Trace, the bond price reporting system of the NASD.
The case is In re Refco Inc., 05-60006, U.S. Bankruptcy Court, Southern District of New York.
To contact the reporter on this story:
Ann Saphir in Chicago at asaphir@bloomberg.net
Last Updated: November 10, 2005 08:20 EST
