Rogers Funds, Refco Creditors Ask Court to Block Sale (Update1)
Nov. 10 (Bloomberg) -- Refco Inc., the bankrupt futures broker that's auctioning off its assets and may decide on a buyer as soon as today, faces a potential obstacle from creditors who say they'll be hurt by a sale.
Funds controlled by Jim Rogers that claim they're owed $362 million by Refco asked a court yesterday to reject any agreement the company reaches with a bidder. Creditors including Rogers, a former partner of hedge fund pioneer George Soros, said the proposed terms of a sale would block them from collecting from accounts that remain frozen.
Refco, based in New York, is trying to raise money to pay off debts after filing the 14th-largest bankruptcy in U.S. history on Oct. 17. The auction, which began yesterday morning, continued late last night, said Refco spokesman Jim Craig.
``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,'' the Rogers Funds said in a court filing yesterday. The U.S. Bankruptcy Court in New York should block the Refco sale ``in its entirety,'' the filing said.
Craig said late last night that Refco's lawyers were at the auction and couldn't immediately comment on the objections filed by customers and creditors.
Five Bidders
Refco said last week that five groups submitted bids to participate in the auction.
Man Group Plc, the world's biggest publicly traded hedge fund manager, Interactive Brokers Group LLC and a group led by the Dubai government said they submitted bids for Refco assets. New York buyout firm J.C. Flowers & Co. also submitted a bid, according to court documents.
Refco yesterday disqualified Alaron Trading Corp., a Chicago-based futures trader specializing in individual accounts, from bidding. The auction may result in a bid of as much as $1 billion, said Alaron Managing Partner Gary Weber.
Customers and creditors that also filed objections to Refco's auction include Leuthold Funds Inc., Leuthold Industrial Metals Fund LP, Inter Financial Services Ltd. Refco's Chicago landlord, West Loop Equities LLC, argued that a transaction shouldn't be approved until the landlord learns the fate of its $6 million annual rent for office space on West Jackson Avenue.
Rogers Funds
If the sale goes forward, the court should freeze the proceeds until it determines the status of the Rogers Funds' assets, the funds argued.
The Rogers Raw Materials Fund and the smaller Rogers International Raw Materials Fund LP together are owed $362 million by Refco, according to court filings. Rogers Raw Materials Fund is listed in court papers as the fourth-biggest holder of unsecured Refco claims, with $287 million, and the other fund ranks No. 13, with $75 million.
Federal prosecutors have until today to charge Refco Chief Executive Phillip Bennett, 57. Bennett was arrested Oct. 12 by U.S. authorities and charged with securities fraud, prompting a customer exodus and the shutdown of several units, including Refco Capital Markets Ltd. He may face life in prison if he's convicted.
Refco's shares rose 4 cents, or 3.4 percent, to $1.20 yesterday on the New York Stock Exchange. The shares had been worth $30 each two months ago.
The company's 9 percent notes maturing in 2012 rose .5 cent to 77.5 cents on the dollar yesterday, according to Trace, the bond-price system of NASD. The notes are 30 cents on the dollar below the price before the company's disclosure on Oct. 10 of the hidden debts.
The bankruptcy case is In re Refco Inc., No. 05-60006, in U.S. Bankruptcy Court, Southern District of New York.
bloomberg.com |
