Refco receives tentative approval of disclosure statement; company must file clarifications

By Jennifer Lanning Drey

Portland, Ore., Oct. 16 - Refco, Inc. obtained tentative approval of its disclosure statement, subject to the U.S. Bankruptcy Court for the Southern District of New York receiving certain clarifications requested by Judge Robert Drain during a hearing on Monday, according to a source at the hearing.

The clarifications are expected to be filed within the next few days, according to the source.

As previously reported, Refco's plan of reorganization is based on settlements to resolve a variety of intercreditor disputes.

According to the disclosure statement, the company hopes to emerge from Chapter 11 by Dec. 31.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of $700,000 in other Refco secured claims, $120,000 in other Refco F/X secured claims and $110.4 million in other Refco Capital Markets secured claims will recover 100% in cash, proceeds from the sale of any property securing the claim or the surrender of any property securing the claim;

• Holders of $704 million in secured lender claims, Refco F/X secured lender claims and Refco Capital Markets secured lender claims will recover 100% in full payment of any amounts not paid under the company's early payment order;

• Holders of $397.4 million in senior subordinated note claims will recover 83.4% in a share of the senior subordinated note distribution;

• Holders of $522.7 million in contributing debtors' general unsecured claims will recover 23% in a share of the contributing debtors' general unsecured distribution;

• Holders of Refco Capital Markets, Ltd. intercompany claims will receive a share of the intercompany claims distribution;

• Holders of subordinated claims will receive a share of tranche B litigation trust preferred interests;

• Holders of old equity interests will receive a share of 10% of the initial public offering underwriter claims recovery or a share of the tranche B litigation trust common interests, provided that the contributing debtors and all parties in interest reserve the right to assert that the interests of insider Refco Inc. shareholders should not be entitled to any distribution under the plan;

• Holders of $397.4 million in Refco F/X senior subordinated note claims will waive their claim in return for plan releases;

• Holders of $140.7 million to $180.7 million in Refco F/X general unsecured claims will recover 35% in a share of the Refco F/X general unsecured distribution;

• Holders of $12.5 million in Refco F/X convenience claims will receive cash in the amount of 40% of their claim. Under the original plan, these creditors were to receive cash equal to 25% of their claim;

• Holders of Refco F/X subordinated claims will receive no distribution under the plan;

• Holders of $985.6 million in Refco Capital Markets F/X unsecured claims will recover 37.6% in a share of the Refco Capital Markets F/X unsecured claims distribution and, unless the holder elects otherwise before the voting deadline, the RCM Bawag proceeds; provided that intercompany claims held against Refco Capital Markets by any debtor will receive no distribution and that those claims will instead be released under the plan;

• Holders of $2.794 billion in Refco Capital Markets securities customer claims will recover 85.4% in a share of the Refco Capital Markets securities customer claims distribution and, unless the holder elects otherwise before the voting deadline, the RCM Bawag proceeds; and

• Holders of $15.6 million in Refco Capital Markets' Leuthold Metals claims will recover 100% in its share of a Leuthold Metals claims distribution. This class was not included in the original plan.

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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