Refco requests court approval of bid procedures for $768 million futures brokerage unit sale

By Caroline Salls

Pittsburgh, Oct. 21 - Refco, Inc. requested approval of the acquisition agreement and bidding procedures for the proposed $768 million sale of its futures brokerage business to a group of investors led by J.C. Flowers & Co., LLC, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The futures brokerage arm of Refco is conducted through Refco LLC, Refco Overseas Ltd., Refco Singapore Ltd., related subsidiaries and other assets.

The investor group includes entities associated with J.C. Flowers, The Enstar Group, Inc., Silver Point Capital, MatlinPatterson Global Advisers LLC and Texas Pacific Group.

The proposed purchase price for the futures brokerage arm equals 103% of the net capital of the acquired businesses.

Refco also will have the option to retain up to 20% of the equity value of the entities being sold, according to the release.

If the J.C. Flowers investors are not the high bidders, Refco will pay a breakup fee of 2.8% of the purchase price and an expense reimbursement of $5 million. The reimbursement can be increased to $7 million.

The initial overbid must be equal to the J.C. Flowers' group bid plus the $2 million minimum overbid increment, plus the breakup fee plus $5 million.

Subsequent overbids must be for at least $2 million more than the previous bid.

A hearing is scheduled for Oct. 24, at which time the auction and sale hearing dates will be set.

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

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