Refco Bidder Peterffy Says He's `Determined' to Win (Update1)
Oct. 27 (Bloomberg) -- Thomas Peterffy, whose firm has made the highest disclosed bid for Refco Inc., said he is determined to beat competitors in the bidding war for the bankrupt futures broker's regulated businesses.
``We aim to get it,'' said Peterffy, founder of Greenwich, Connecticut-based Interactive Brokers LLC, in an interview today. `` It's not to say that we couldn't find out something that would make us change our mind, but we are determined to go forward.''
Interactive, the largest U.S. market-maker in stock options, is among at least seven groups of investors vying to buy all or part of Refco at a bankruptcy auction scheduled for Nov. 9. Interactive offered $858 million, topping an $828 million bid from a group led by the government of Dubai and California billionaire Ronald Burkle.
Refco was the largest independent U.S. broker in the $4.5 trillion-a-day market for futures until the New York-based firm collapsed because former Chief Executive Officer Phillip Bennett hid bad debts. Refco filed the 14th-biggest bankruptcy in U.S. history on Oct. 17.
Peterffy, 61, is competing to buy parts of Refco against the Dubai group as well as firms including Merrill Lynch & Co., the world's largest securities firm by market value and Leon Black's Apollo Management LLC. The deadline to submit offers is Nov. 4.
No bidder is likely to try to purchase all of Refco's assets, which include dozens of units including an unregulated trading business that handles currency and over-the-counter derivatives transactions.
`Guts'
``There are literally maybe 100 different companies and we have very few days to do our due diligence,'' Peterffy said. ``For anybody to have the guts to pick up the whole thing is very unlikely.''
Interactive limited its bid to Refco's futures units, including Refco LLC, Refco Overseas Ltd. and Refco Singapore Ltd. These businesses were left out of the bankruptcy filing.
While client assets at Refco's futures units halved to $3.4 billion from $7.5 billion in the days before the bankruptcy filing, Refco has probably retained the most profitable 80 percent of its customer accounts, Peterffy said.
``It is the large funds that have left and they are basically the low-margin business,'' he said. ``I do not think that their leaving is really hurting the profitability of that business, if there is any profit in that business.''
Bidding Alone
Refco gave large customers low rates with which Interactive had been unwilling to compete, he said. ``Refco was so anxious to show very high volumes that they have negotiated these fees down to a break-even level,'' he said.
Peterffy, who fled communism in his native Hungary at age 21, has used technology to undercut competitors on trading fees and prices. Interactive now ranks No. 41 in futures trading. Before its insolvency, Refco was eighth in the U.S. by customer assets behind firms including Goldman Sachs Group Inc. and Citigroup Inc., according to the Commodity Futures Trading Commission.
Refco doesn't need a partner to pursue its bid, Peterffy said.
As a futures broker, Interactive Brokers has an ``inherent advantage'' over private equity firms because it has expertise, he said. ``Any company in the business would get more value out of it,'' including Merrill Lynch, which has also expressed an interest in bidding, Peterffy added.
Peterffy may also seek to buy Refco's securities brokerage business, he said. ``It would all depend on what we found during our course of doing due diligence, because there may be some problems in the securities entity'' given that the parent company has declared bankruptcy.
Interactive has $2 billion in cash and ``significant liquidity,'' said Gary J. Mennitt, a lawyer for Interactive, in an Oct. 19 interview. The company operates in 14 countries. |
