Refco shareholders request appointment of official equity committee

By Caroline Salls

Pittsburgh, May 1 - Refco, Inc. shareholders requested appointment of an official committee of equity security holders for the company's Chapter 11 case, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee was requested by JMB Capital Partners, LP, Lonestar Capital Management, LLC, Mason Capital Management, Smith Management LLC and Triage Management LLC, who collectively hold 8.1 million or 26.56% of Refco's common shares.

According to the motion, Refco's unique structure and assets make it certain that equity security holders should receive a dividend because the valuable causes of action held by Refco against its officers, directors and advisers put the equity security holders "in the money" because Refco itself has no significant debt.

The shareholders also said a liquidating dividend may flow to the securityholders from some of Refco's solvent subsidiaries.

"If equity security holders do not have an official seat at the table, their interests will be sacrificed for those who do resulting in an unfair and inequitable outcome of these cases," the motion said.

The shareholders said they asked the company's U.S. Trustee to appoint an official equity committee in February; the Trustee deferred the decision until the recently appointed examiner commences and completes his investigation.

The shareholders said the examiner has not been authorized by the court to address crucial issues for equity, such as intercompany claims.

By the time the examiner completes his investigation, which does not include addressing intercompany claims and will probably not include the parent-specific causes of action, the shareholders said a plan will have been negotiated and it might be too late to appoint an equity committee.

A hearing is scheduled for May 23.

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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