Quote from BlueHorseshoe:
That would be unfortunate ... Refco had its strengths and Man has been further behing the curve.
Refco actually has a durable brand, if it can isolate these issues with the CEO and move on.
What a shame ...
For most of the week, I thought that TH Lee would want to pump capital into Refco and try to put the firm onto firm grounds and then selling assets for better value than the confusion and negative publicity for the last few days. However, if the news reports that the regulators are talking to potential buyers (Man, Fimat, Goldman, etc) seem to indicate is that TH Lee is not willing to providing additional funding, if the reports are to be believed.
This is too bad, it is understandable from TH Lee's part in that they got caught with an unexpected situation, and they are not certain how many more potentially holes there are in Refco as a whole, and won't want to risk more capital than what they have invested already. However, by not directly coming out and signal their strong backing, the situation can get worse before it gets better. Confidence, whether investors or customers are hard to regain once lost.
Disclaimer, what below is a pure speculation from my personal perspective. First of all, anybody will buy anything for the right price, but assuming that a "fair" discounted price will be used for Refco the futures division, then the potential buyers may be. Man maybe a good fit, but their one-side-fit-all aproach would mean that they would just take most of the client base, and dump most of Refco's infrastructure and substantial head count. Fimat would be a good fit as well, but what I know is that SG (the parent company) is not terribly happy with the margins generated by the Fimat division, as clearing futures and derivatives is a low margin business. I would doubt that Goldman would be interested (of course, for the right price, everybody can be), since they are already exposed in terms of the potential underwriter liability. HSBC maybe a possibility, given Joe Murphy's prior job as head of HSBC Futures in US, however HSBC's recent focus have been on credit derivatives (using the gigantic bank balance sheet). ABN AMRO would have been a great fit, four years ago, when they were expanding rapidly in the US, AA is now much more cautious about big purchases. Fortis would be a good choice, it is a well run organization, and is looking to expand in the US derivative market, especially in derivatives clearing, but it is not that big internationally, and may not want to pony up the cash (at least $500M) for Refco futures business. Merrill is another one, but Merrill Pro is still integrating the PAX and Sage businesses, not sure they want to take on integrating another firm in the process. BofA maybe already too exposed with both being the underwriter, and syndicate lead for Refco's existing subordinated debt.
Another problem looming in the horizon is that Refco is due to make some performance related payments to the Cargill IS buy. I would bet that if Refco misses the payment, the Buy would be reversed, with Cargill retaining control in some way. Having Cargill as a long term customer would have been a good revenue generator for Refco.
Just my $0.02
