Refco 'disappointed' in Forex's decision to pull out client accounts sale, hopes to salvage sale

By Caroline Salls

Pittsburgh, March 30 - Refco, Inc. said it is disappointed by a decision by Forex Capital Markets LLC to pull out of its agreement to acquire the more than 17,000 client accounts of Refco FX Associates LLC and Refco's 35% share of Forex, saying the decision was prompted by objections to the sale, according to a company news release.

Refco said the objections were made by its official committee of unsecured creditors and the agent for its bank lending group.

Refco said it remains committed to the proposed sale, but all parties have agreed to postpone the April 11 hearing to allow more time for discussion. No new hearing date has been scheduled.

"We continue to believe that the negotiated agreement is in the best interest of Refco FX Associates' customers and Refco's creditors," the company said in the release.

"We very quickly reached an agreement with [Forex] that not only provided for the sale of the Refco FX client accounts but also allowed clients to continue trading in their accounts with only limited disruption pending the sale and transfer of the accounts.

"We still hope that a transaction can be restored and that we will be able to conclude this phase of Refco's bankruptcy to the benefit of all parties."

On Jan. 20, the auction and bid deadlines were postponed at the request of the committee and lender agent

According to the motion, the postponement was necessary because of a significant delay caused by Forex Capital Markets.

The committee and agent said Forex was also responsible for providing the necessary information for the data room so that potential bidders would have enough time to review the information to form a bid. The motion said that although the company's intent was to have all necessary information posted in the data room on Jan. 2, for various reasons it was not available until Jan. 14 and 15.

Forex objected to the postponement and said it "vigorously disputes the allegation that it was slow to provide information" to the data room for potential bidders.

Forex said the positions it took on information requests were extremely reasonable and that it provided an enormous amount of information in response to "piecemeal" information requests.

The company called the motion an attempt to make a scapegoat out of Forex and demand even more money from it.

Refco, a New York-based commodities brokerage company, filed for bankruptcy on Oct. 17 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-60006.

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