Refco creditors ask court to reverse U.S. Trustee decision to 'gut' creditors committee

By Caroline Salls

Pittsburgh, Aug. 2 - Five Refco, Inc. creditors that were purportedly removed from the company's official committee of unsecured creditors asked the U.S. Bankruptcy Court for the Southern District of New York to reverse the U.S. Trustee's decision to change the committee membership, according to a Wednesday court filing.

The purportedly removed creditors are VR Global Partners, LP, Cargill, Inc., Premier Bank International NV, Fimex International, Ltd. and Markwood Investments Ltd.

The removed creditors said their reinstatement is necessary to ensure all creditors are adequately represented in Refco's case.

According to the motion, the U.S. Trustee, "without prior consultation or advance warning, unilaterally gutted the nine member official committee of unsecured creditors on July 21, 2006, by removing all of its members except the three members representing bondholders."

The removed creditors said the disenfranchisement of all unsecured creditors other than bondholders is illegal, given that non-bondholder claims represent approximately 90% of all unsecured non-insider claims at issue in the company's Chapter 11 cases.

The motion said the removal included members who have substantial claims against Refco Capital Markets, Ltd. and the non-Refco Capital Markets' debtors.

The removed creditors said the decision could not have come at a more inopportune time for creditors of Refco's estates because the cases are at a critical juncture given the Aug. 31 deadline imposed under a settlement agreement for converting the Refco Capital Markets Chapter 11 case to a case under Chapter 7.

"Forgoing consensus on a global Chapter 11 plan for all debtors is unrealistic given the time constraints unless the purportedly removed committee members are restored to the official committee," the creditors said in the motion.

Refco, a New York-based commodities brokerage company, filed for bankruptcy on Oct. 17, 2005. Its Chapter 11 case number is 05-60006.

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