- The Washington Times - Tuesday, October 18, 2005

NEW YORK (Bloomberg) — Refco Inc., the futures broker under investigation about $430 million of debt, filed for court protection from creditors yesterday in the fourth-largest U.S. bankruptcy.

Shares of Refco plunged, wiping out $924 million in market value, after the company asked a U.S. bankruptcy court in Manhattan for permission to reorganize its $48.6 billion in liabilities.

In the filing, New York-based Refco left out the units it plans to sell to a buyout group led by J.C. Flowers & Co. for $768 million.

Refco’s collapse comes 10 weeks after it sold shares to the public for the first time, and may set up a contest between the Flowers group and the government of Dubai, whose offers to purchase the whole company have been rebuffed.

“It’s a mess, an absolute mess,” said Kevin Starke, who covers distressed and recently bankrupt companies for Weeden & Co. in Greenwich, Connecticut. “The one goal they have to have right away is providing the largest recovery for creditors. You see that Flowers is going to want to lowball them as much as possible. It sounds like he’s almost buying the assets for nothing.”

Refco listed assets of $48.8 billion in its filing, which included the parent company and 23 of its units. The company’s 127.5 million shares, which were delisted from the New York Stock Exchange, resumed trading under the symbol “RFXCQ” and fell $7.25 to 65 cents in over-the-counter trading yesterday.

Refco fired Chief Executive Officer Phillip Bennett last week, just before he was arrested by federal authorities and charged with hiding $430 million he owed the company. That prompted a customer exodus and the shutdown of some of its units including Refco Capital Markets Ltd.

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