Refco requests court approval of Refco F/X customer database

By Caroline Salls

Pittsburgh, July 3 - Refco, Inc. requested court approval to allow Refco F/X Associates to sell its customer database to GAIN Capital Group, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The database includes Refco F/X's customer list and marketing list.

The proposed sale stems from objections to the previously attempted sale of Refco F/X under which the official committee of unsecured creditors contended that the F/X equity and its customer database should be sold in separate transactions if the proposed purchase price was not significantly increased to adequately compensate the company.

Under the new purchase agreement, GAIN will open a foreign exchange customer trading account for everyone on the customer list that consents to the opening of an account with GAIN within one year after the closing of the sale.

GAIN will fund the newly opened GAIN accounts in an amount equal to the lesser of the customer's total previous account balance or $150.

The funds so deposited in the GAIN customer accounts will be available to customers with account balances of $40 or less, without restriction. For customers with account balances greater than $40, the funds will be available to customers upon the completion of one round trip lot trade.

For each customer who has an account balance in excess of its initial customer deposit, GAIN will deposit on the six-month, one-year, 18-month and two-year anniversaries of the trading start date a supplemental deposit equal to 25% of the excess of the customers' F/X account balance over the initial customer deposit if the customer maintains a customer account at GAIN at the end of the period and meets a trading threshold.

Customers with an account balance of more than $1,000 that do not qualify for a supplemental deposit who have traded in a sufficient volume such that they would have satisfied the trading threshold if they were in the account range immediately below theirs will receive a deposit equal to 10% of the excess of the account balance over the initial customer deposit.

F/X will earn a standard introducing broker maintenance fee for each GAIN account opened from an individual identified on the customer list or marketing list, and GAIN will receive a credit toward these maintenance fees in an amount equal to the amounts initially funded in customer accounts plus any guaranteed consideration payment paid by GAIN plus $50,000.

If Refco is unable to provide GAIN with the marketing list, it will receive an additional credit of $250,000 applicable against the maintenance fees.

In addition, if the deposits to customer accounts actually funded by GAIN on or before the first anniversary of the closing do not equal or exceed $2.5 million, GAIN will pay Refco the difference between $2.5 million and the funded deposits in cash.

If Refco enters into a competing transaction, it will pay GAIN a $50,000 break-up fee and $50,000 in expense reimbursement.

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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