Refco creditors committees to negotiate global committee; show cause hearing postponed to Aug. 16

By Caroline Salls

Pittsburgh, Aug. 10 - Refco, Inc.'s show cause hearing on reversing the U.S. Trustee's decision to alter the official committee of unsecured creditors was postponed to Wednesday to allow the original committee and newly appointed additional committee to negotiate establishment of a global creditors committee.

According to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York, the original committee and the additional committee are also permitted to use the services and professionals retained by the creditors committee as of July 20.

As previously reported, five creditors that were purportedly removed from the committee as part of the U.S. Trustee's July 21 decision to change the committee structure asked the court to reverse the decision.

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.

On Aug. 4, the U.S. Trustee split the official unsecured creditors committee and appointed one committee to represent Refco, Inc. creditors and one to represent Refco Capital Markets' account holders.

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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