Interactive Brokers Group Bids For Refco's Futures Business
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Refco receives rival bid for futures brokerage unit (RFXCQ) By Carla Mozee
SAN FRANCISCO (MarketWatch) -- Interactive Brokers Group said after Thursday's closing bell it has submittted a rival bid to buy Refco Inc.'s futures and commodities trading business. Interactive Brokers, a privately held firm in Greenwich, Conn., didn't specify the terms of its proposal but said it would be higher than the preliminary agreement, valued at $768 million, that Refco currently has with a private investor group led by J. Christian Flowers. Interactive Brokers said it's offering to pay 106% of net regulatory capital, rather than the 103% offered by Flowers.
SAN FRANCISCO (MarketWatch) -- Interactive Brokers Group said after Thursday's closing bell it has submittted a rival bid to buy Refco Inc.'s futures and commodities trading business. Interactive Brokers, a privately held firm in Greenwich, Conn., didn't specify the terms of its proposal but said it would be higher than the preliminary agreement, valued at $768 million, that Refco currently has with a private investor group led by J. Christian Flowers. Interactive Brokers said it's offering to pay 106% of net regulatory capital, rather than the 103% offered by Flowers.
now i know we are in a bear mkt.
Interactive Brokers vie for investors
By Julie Fishman-Lapin
Staff Writer
Published October 20 2005
Greenwich-based electronic brokerage firm Interactive Brokers may be in the market to acquire the regulated futures business of Refco Inc.
Refco, which filed for bankruptcy protection this week, agreed to sell its regulated futures trading units for $768 million to J.C. Flowers & Co. The sale is subject to court approval.
Other bidders, which may include Interactive and the government of Dubai, will be permitted to bid against Flowers for any or all of Refco's units.
"Interactive is truly interested in seeking Refco's listed futures business either by signing up its customers or otherwise," said Isabelle Clary, who declined to confirm nor deny the firm's intention to make a bid.
Gary Mennitt, a lawyer for Interactive, said he thought the Flowers bid was too low and that Interactive may make a higher bid. Interactive, which Mennitt said has $2 billion and "significant liquidity," wants more time to do research on Refco, he said.
Meanwhile, as Refco unravels, Interactive is aggressively vying for the customers that are fleeing the collapsed futures brokerage.
The mass exodus from Refco is providing a rare window of opportunity for the Greenwich brokerage as it tries to build a bigger name for itself in the world of futures and foreign exchange trading, said Steve Sanders, Interactive Brokers' managing director.
With thousands of Refco customers on the market for a new broker, Interactive quickly launched a major print and television advertising campaign that includes full-page ads in the Wall Street Journal, New York Times, Barron's, The Financial Times and the Chicago Tribune.
A television commercial, also targeting former Refco customers by putting an emphasis on futures trading, has begun running worldwide on CNBC, Sanders said.
And the ad blitz seems to be paying off.
"We've been getting inquiries since last Monday," Sanders said. "Today we had 100 calls to transfer over accounts."
Interactive's software-based trading platform enables customers to trade in stocks, exchange-traded funds, options, futures, commodities, bonds and foreign currencies on more than 50 markets and exchanges in 14 countries. Its customers include institutional investors, hedge funds, brokerage firms, banks and money managers.
But Interactive Brokers has had a difficult time breaking Refco's tight hold on the futures and Forex markets.
The collapse of Refco will give its competitors an opportunity to grab new clients, said Eugene Kunda, visiting director for the Office for Futures and Options Research at the University of Illinois at Urbana-Champaign.
"Refco claimed to have had 250,000 futures account worldwide. I don't know of any others that are even claiming anywhere near that number," Kunda said.
Despite the large numbers of accounts now seeking new brokers, its still a competitive landscape, Kunda said. There are hundreds of brokers wanting Refco's former customers.
"Since you are dealing with traders they will be looking for the best deals not only in the market but with who handles their accounts," Kunda said.
And Interactive is dealing with that competition by lowering its commissions, Sanders said.
Announced yesterday, Interactive's new pricing structure for futures and futures on options ranges from 25 cents to $1.20, based on monthly volume, down from 55 cents to $1.30.
Interactive also has significantly lowered its execution and clearing fees for futures trading on overseas markets, Sanders said.
"Interactive Brokers is ready to offer Refco's customers who trade futures and foreign exchange around the world the same market access they enjoyed with our competitor," he said.
Copyright © 2005, Southern Connecticut Newspapers, Inc.
By Julie Fishman-Lapin
Staff Writer
Published October 20 2005
Greenwich-based electronic brokerage firm Interactive Brokers may be in the market to acquire the regulated futures business of Refco Inc.
Refco, which filed for bankruptcy protection this week, agreed to sell its regulated futures trading units for $768 million to J.C. Flowers & Co. The sale is subject to court approval.
Other bidders, which may include Interactive and the government of Dubai, will be permitted to bid against Flowers for any or all of Refco's units.
"Interactive is truly interested in seeking Refco's listed futures business either by signing up its customers or otherwise," said Isabelle Clary, who declined to confirm nor deny the firm's intention to make a bid.
Gary Mennitt, a lawyer for Interactive, said he thought the Flowers bid was too low and that Interactive may make a higher bid. Interactive, which Mennitt said has $2 billion and "significant liquidity," wants more time to do research on Refco, he said.
Meanwhile, as Refco unravels, Interactive is aggressively vying for the customers that are fleeing the collapsed futures brokerage.
The mass exodus from Refco is providing a rare window of opportunity for the Greenwich brokerage as it tries to build a bigger name for itself in the world of futures and foreign exchange trading, said Steve Sanders, Interactive Brokers' managing director.
With thousands of Refco customers on the market for a new broker, Interactive quickly launched a major print and television advertising campaign that includes full-page ads in the Wall Street Journal, New York Times, Barron's, The Financial Times and the Chicago Tribune.
A television commercial, also targeting former Refco customers by putting an emphasis on futures trading, has begun running worldwide on CNBC, Sanders said.
And the ad blitz seems to be paying off.
"We've been getting inquiries since last Monday," Sanders said. "Today we had 100 calls to transfer over accounts."
Interactive's software-based trading platform enables customers to trade in stocks, exchange-traded funds, options, futures, commodities, bonds and foreign currencies on more than 50 markets and exchanges in 14 countries. Its customers include institutional investors, hedge funds, brokerage firms, banks and money managers.
But Interactive Brokers has had a difficult time breaking Refco's tight hold on the futures and Forex markets.
The collapse of Refco will give its competitors an opportunity to grab new clients, said Eugene Kunda, visiting director for the Office for Futures and Options Research at the University of Illinois at Urbana-Champaign.
"Refco claimed to have had 250,000 futures account worldwide. I don't know of any others that are even claiming anywhere near that number," Kunda said.
Despite the large numbers of accounts now seeking new brokers, its still a competitive landscape, Kunda said. There are hundreds of brokers wanting Refco's former customers.
"Since you are dealing with traders they will be looking for the best deals not only in the market but with who handles their accounts," Kunda said.
And Interactive is dealing with that competition by lowering its commissions, Sanders said.
Announced yesterday, Interactive's new pricing structure for futures and futures on options ranges from 25 cents to $1.20, based on monthly volume, down from 55 cents to $1.30.
Interactive also has significantly lowered its execution and clearing fees for futures trading on overseas markets, Sanders said.
"Interactive Brokers is ready to offer Refco's customers who trade futures and foreign exchange around the world the same market access they enjoyed with our competitor," he said.
Copyright © 2005, Southern Connecticut Newspapers, Inc.
IB, bad customer relation concept.
Interactive Brokers Bids for Refco's Futures Business (Update1)
Oct. 20 (Bloomberg) -- Interactive Brokers Group LLC, the biggest independent U.S. broker-dealer, said it made an offer for the regulated futures units of Refco Inc. that exceeds the bid of J.C. Flowers & Co.
Interactive told Refco's bankruptcy lawyers it's willing to pay 106 percent of Refco's net regulatory capital, a sum that's subject to change as Refco struggles to satisfy customers and creditors following its filing for bankruptcy on Oct. 17. Flowers offered 103 percent.
Interactive Brokers is ``prepared to execute a memorandum of understanding, on the same terms as Flowers,'' except for the increased purchase price and the absence of a break-up fee, according to the letter, sent to Skadden Arps Slate Meagher & Flom.
The Interactive bid came as several Refco customers objected in U.S. bankruptcy court in Manhattan to a proposal by Bank of America Corp. to permit Refco to use $10 million for bankruptcy expenses out of cash collateral the bank held on a $644 million loan.
Rogers International Raw Materials Fund LP, an investment fund controlled by George Soros's former partner Jim Rogers, said 63 percent of its assets are locked up because of Refco's bankruptcy. The Rogers Fund asked bankruptcy judge Robert Drain to make sure that its money was protected before the judge agreed to the Bank of America plan.
Customer Money
Rietumu Banka, based in Riga, Latvia, and RB Securities, a firm affiliated with Reitumu, also objected to the Bank of America plan because of concern about assets they placed with Refco to use for customer trades.
When the agreement with Flowers was signed on Oct. 17, Refco's futures business had net regulatory capital of $746 million, generating a purchase price of $768 million. Interactive Brokers' bid would generate a purchase price of $791 million. If that capital decreases, so would the purchase price.
Refco's memorandum of understanding with Christopher Flowers's New York-based buyout firm requires competing bids to be at least $20 million higher than the $768 million offer.
Refco lawyer J. Gregory Milmoe of Skadden Arps told Drain yesterday that the company is seeking an expedited sale process to preserve value for creditors owed more than $16 billion.
On Oct. 14, the regulated business had $7.5 billion in customer accounts. That dropped to $4.1 billion by Oct. 18 amid concern by customers that they would lose their investments, Milmoe said at yesterday's hearing. He described the assets as ``an ice cube that has been melting.''
Break-Up Fee
Refco also agreed to pay Flowers a fee equal to 2.8 percent of the purchase price should it sell the assets to another buyer. Break-up fees typically average between 2.5 percent and 3 percent in large bankruptcy sales. Refco would need to obtain court approval to pay the fee.
In its original filing on Oct. 17, Refco listed $48.8 billion in assets as of February 2005, adding in a footnote that the company's financial statements as of February 2002- 2005 couldn't be relied upon. Court papers submitted yesterday listed assets of $16.5 billion as of August 2005.
Refco announced Oct. 10 that it had discovered a $430 million debt to the company owed by then-chief executive Phillip Bennett, who was then relieved of his duties. Bennett, 57, was arrested the next day and charged with securities fraud for hiding the debt, which he has repaid.
The case is In re Refco Inc., No. 05-60006, U.S. Bankruptcy Court, Southern District of New York.
To contact the reporter on this story:
Andrew Dunn in New York at
adunn8@bloomberg.net; or Tom Becker in U.S. Bankruptcy Court in
New York tbecker5@bloomberg.net.
Last Updated: October 20, 2005 18:34 EDT
Oct. 20 (Bloomberg) -- Interactive Brokers Group LLC, the biggest independent U.S. broker-dealer, said it made an offer for the regulated futures units of Refco Inc. that exceeds the bid of J.C. Flowers & Co.
Interactive told Refco's bankruptcy lawyers it's willing to pay 106 percent of Refco's net regulatory capital, a sum that's subject to change as Refco struggles to satisfy customers and creditors following its filing for bankruptcy on Oct. 17. Flowers offered 103 percent.
Interactive Brokers is ``prepared to execute a memorandum of understanding, on the same terms as Flowers,'' except for the increased purchase price and the absence of a break-up fee, according to the letter, sent to Skadden Arps Slate Meagher & Flom.
The Interactive bid came as several Refco customers objected in U.S. bankruptcy court in Manhattan to a proposal by Bank of America Corp. to permit Refco to use $10 million for bankruptcy expenses out of cash collateral the bank held on a $644 million loan.
Rogers International Raw Materials Fund LP, an investment fund controlled by George Soros's former partner Jim Rogers, said 63 percent of its assets are locked up because of Refco's bankruptcy. The Rogers Fund asked bankruptcy judge Robert Drain to make sure that its money was protected before the judge agreed to the Bank of America plan.
Customer Money
Rietumu Banka, based in Riga, Latvia, and RB Securities, a firm affiliated with Reitumu, also objected to the Bank of America plan because of concern about assets they placed with Refco to use for customer trades.
When the agreement with Flowers was signed on Oct. 17, Refco's futures business had net regulatory capital of $746 million, generating a purchase price of $768 million. Interactive Brokers' bid would generate a purchase price of $791 million. If that capital decreases, so would the purchase price.
Refco's memorandum of understanding with Christopher Flowers's New York-based buyout firm requires competing bids to be at least $20 million higher than the $768 million offer.
Refco lawyer J. Gregory Milmoe of Skadden Arps told Drain yesterday that the company is seeking an expedited sale process to preserve value for creditors owed more than $16 billion.
On Oct. 14, the regulated business had $7.5 billion in customer accounts. That dropped to $4.1 billion by Oct. 18 amid concern by customers that they would lose their investments, Milmoe said at yesterday's hearing. He described the assets as ``an ice cube that has been melting.''
Break-Up Fee
Refco also agreed to pay Flowers a fee equal to 2.8 percent of the purchase price should it sell the assets to another buyer. Break-up fees typically average between 2.5 percent and 3 percent in large bankruptcy sales. Refco would need to obtain court approval to pay the fee.
In its original filing on Oct. 17, Refco listed $48.8 billion in assets as of February 2005, adding in a footnote that the company's financial statements as of February 2002- 2005 couldn't be relied upon. Court papers submitted yesterday listed assets of $16.5 billion as of August 2005.
Refco announced Oct. 10 that it had discovered a $430 million debt to the company owed by then-chief executive Phillip Bennett, who was then relieved of his duties. Bennett, 57, was arrested the next day and charged with securities fraud for hiding the debt, which he has repaid.
The case is In re Refco Inc., No. 05-60006, U.S. Bankruptcy Court, Southern District of New York.
To contact the reporter on this story:
Andrew Dunn in New York at
adunn8@bloomberg.net; or Tom Becker in U.S. Bankruptcy Court in
New York tbecker5@bloomberg.net.
Last Updated: October 20, 2005 18:34 EDT
