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REFCO bankruptcy before Bankruptcy law date?
- Thread starter mahram
- Start date
Can someone who has a good handle on the various entities that make up Refco comment on which pieces will most likely suffer what consequences?
I don't really understand the situation.
The capital markets division which does prime brokerage is done for - because they need to raise capital in order to finance their customer's positions and Refco's cost of capital is now completely uncompetitive. Hedge funds are skittish customers and will bolt.
The brokerage division is also done for as long as they handle margin accounts which require internal financing of margined positions.
I don't quite get why the FCM business will die a horrible death. Customers will flee for sure, but how is an FCM as severely affected by cost of capital as a brokerage or prime? I thought all of us put up the necessary margins so we are "financing" our own positions. Futures contracts don't really have genuine "margin" since it's a good faith deposit on a forward position.
The Refco brand name is still worth something though - I'm sure someone will pick it up for something, although Tommy Lee is probably cursing all the way to the bank. Too bad they got greedy and decided to wait for the secondary to unload their 39% position.
I don't really understand the situation.
The capital markets division which does prime brokerage is done for - because they need to raise capital in order to finance their customer's positions and Refco's cost of capital is now completely uncompetitive. Hedge funds are skittish customers and will bolt.
The brokerage division is also done for as long as they handle margin accounts which require internal financing of margined positions.
I don't quite get why the FCM business will die a horrible death. Customers will flee for sure, but how is an FCM as severely affected by cost of capital as a brokerage or prime? I thought all of us put up the necessary margins so we are "financing" our own positions. Futures contracts don't really have genuine "margin" since it's a good faith deposit on a forward position.
The Refco brand name is still worth something though - I'm sure someone will pick it up for something, although Tommy Lee is probably cursing all the way to the bank. Too bad they got greedy and decided to wait for the secondary to unload their 39% position.
Quote from TheStudent:
I don't quite get why the FCM business will die a horrible death. Customers will flee for sure, but how is an FCM as severely affected by cost of capital as a brokerage or prime? I thought all of us put up the necessary margins so we are "financing" our own positions. Futures contracts don't really have genuine "margin" since it's a good faith deposit on a forward position.
Exactly.
And most of the resident morons on ET have been unable to turn their brains on to make this distinction. The futures business of Refco LLC is a viable asset. The segregated futures accounts have nothing to do with bank credit lines, etc., because they are guaranteed by the CME and the Exchange Clearing Corporation.
Half hour ago REUTERS reported that Man Financial was interested in purchasing the futures division of Refco LLC. - - - Obviously, someone of significance sees some value to these accounts.
It's also in the best interests of the Chicago futures industry as a whole that the futures business of Refco stays alive as a viable entity in their battle against EUREX, LIFFE, etc.
http://today.reuters.com/stocks/Quo...&symbol=EMG.L&storyid=234477+14-Oct-2005+RTRS
Quote from ssternlight:
Bonds from Refco, a broker reeling from an accounting scandal involving $430 million of bad debt that likely should have been written down, plummeted 17 cents on the dollar to 23 cents on the dollar, indicating that bond investors see bankruptcy filing as highly likely.
RFX bonds trading at 23 cents?
Hmmm... even Worldcom bondholders ended up getting paid 35.7 cents on the dollar, and RFX has real assets (and cash) to liquidate.
Kinda wishing I had bought some of this paper today down at those prices. I'm no bankruptcy/DIP expert however. Is my general line of thinking correct here?
Quote from Hydroblunt:
The Refcos, Enrons, MCI, etc. are publicized because they pushed the envelope far enough to make themselves examples and provide PR for the prosecutors as they "fight for the little guy". The fact is that this type of corruption is commonplace among public corporation, the whole system of executive compensation & selection by a board of directors is so crooked. A CEO can run a company like crap, run it into the ground, yet still get paid his millions, his options & pension and then go get a new CEO position at some other firm or just jump on a board of directors.
IMO, the bastards caught doing this type of fraud should be left penniless to compensate for the losses and thrown into real prisons, not some country clubs with curfews.
Phil Purcell package to leave Morgan Stanley after beating down the stock: $102M. Yep, you read it right: $102M to do the fine job.
Apex, the problem is that this is a classic run on the bank. Everybody is pulling out money. Nobody will buy refco or any parts till they get to the bottom of the mess. man financial doesnt know whats going on, and the people at refco doesnt know if this goes beyond an ex ceo and 560 millon dollars.
Quote from Apex Capital:
Exactly.
And most of the resident morons on ET have been unable to turn their brains on to make this distinction. The futures business of Refco LLC is a viable asset. The segregated futures accounts have nothing to do with bank credit lines, etc., because they are guaranteed by the CME and the Exchange Clearing Corporation.
Half hour ago REUTERS reported that Man Financial was interested in purchasing the futures division of Refco LLC. - - - Obviously, someone of significance sees some value to these accounts.
It's also in the best interests of the Chicago futures industry as a whole that the futures business of Refco stays alive as a viable entity in their battle against EUREX, LIFFE, etc.
http://today.reuters.com/stocks/Quo...&symbol=EMG.L&storyid=234477+14-Oct-2005+RTRS
well I contacted options council, and they said for the options you can use your options meaning excercise them. If you hold any put above 7.5, yeah excercise them, if they declare bankruptcy on monday, excercise all put options above 2.50..but 2.50's and 5's arent availble so no worries.
Quote from nassau:
Anyone know what really happens to stock or options in this case?
The broker has no idea yet and says we must just wait and see.
w
Absolutely. But I'll bet that they will have a golden cage if convicted.Quote from Rearden Metal:
...
Ebbers' 25 year sentence was a good start. Benett (if found guilty) deserves no less.... and I see no reason for these guys to be doing (relatively comfortable) federal time. Let them do state time with all the other thieves.
Refco arm expected to file for bankruptcy
By David Wighton in New York, Jeremy Grant in Washington and Stephen Schurr in London
Published: October 16 2005 19:43 | Last updated: October 16 2005 19:43
Refco is expected to file for bankruptcy for its unregulated capital markets business as early as Monday as advisers scramble to find buyers for the futures and securities trading arms of the stricken brokerage group.
The capital markets business, which lends securities to hedge funds, is thought unlikely to survive, but people close to the company said a large number of competitors and investment companies had expressed interest in the regulated futures and securities broking businesses.
These may also be put into bankruptcy in the next few days although some of the company's advisers say this would cut the number of potential purchasers.
US regulators are eager to see a quick resolution but have made it clear that some purchasers would not be acceptable.
One expression of interest is understood to have come from Thomas Dittmer, a former head of Refco who was once suspended for six months by the Chicago Mercantile Exchange.
Refco, one of the largest independent futures brokers, operating in 14 countries, has been brought to its knees by the disclosure that its accounts disguised a $430m debt owed by Phillip Bennett, its former chief executive, who was last week charged with securities fraud.
Although Mr Bennett repaid the debt with interest last Monday, the revelation triggered panic among clients and funders. Refco was forced to close its capital markets arm on Thursday and on Friday said it was freezingits regulated securities brokerfor 15 days.
At the weekend, the company took on Greenhill, the investment bank that specialises in restructuring, to work alongside Goldman Sachs, in the attempt to salvage value from the group's dramatic collapse.
http://news.ft.com/cms/s/b8d4d4e2-3e73-11da-a2cb-00000e2511c8.html
By David Wighton in New York, Jeremy Grant in Washington and Stephen Schurr in London
Published: October 16 2005 19:43 | Last updated: October 16 2005 19:43
Refco is expected to file for bankruptcy for its unregulated capital markets business as early as Monday as advisers scramble to find buyers for the futures and securities trading arms of the stricken brokerage group.
The capital markets business, which lends securities to hedge funds, is thought unlikely to survive, but people close to the company said a large number of competitors and investment companies had expressed interest in the regulated futures and securities broking businesses.
These may also be put into bankruptcy in the next few days although some of the company's advisers say this would cut the number of potential purchasers.
US regulators are eager to see a quick resolution but have made it clear that some purchasers would not be acceptable.
One expression of interest is understood to have come from Thomas Dittmer, a former head of Refco who was once suspended for six months by the Chicago Mercantile Exchange.
Refco, one of the largest independent futures brokers, operating in 14 countries, has been brought to its knees by the disclosure that its accounts disguised a $430m debt owed by Phillip Bennett, its former chief executive, who was last week charged with securities fraud.
Although Mr Bennett repaid the debt with interest last Monday, the revelation triggered panic among clients and funders. Refco was forced to close its capital markets arm on Thursday and on Friday said it was freezingits regulated securities brokerfor 15 days.
At the weekend, the company took on Greenhill, the investment bank that specialises in restructuring, to work alongside Goldman Sachs, in the attempt to salvage value from the group's dramatic collapse.
http://news.ft.com/cms/s/b8d4d4e2-3e73-11da-a2cb-00000e2511c8.html
"... And in Europe, Austrian bank BAWAG P.S.K. said on Sunday it was exposed to Refco via credit lines it had issued worth 425 million euros.
Bennett's lawyer said at his bail hearing last week that his client had pledged all of his Refco shares as collateral for the BAWAG bank loan of about $430 million to pay back the receivable. "
Well, there is the bank that is going to take a big hit...
Bennett's lawyer said at his bail hearing last week that his client had pledged all of his Refco shares as collateral for the BAWAG bank loan of about $430 million to pay back the receivable. "
Well, there is the bank that is going to take a big hit...