Refco's bonds climbed 14 points to the 66-67 range as the company received new bids for its futures brokerage business. Its loan price increased a point to the 94-96 range. One trader said hedge funds were the most active buyers of the bonds.
J.C. Flowers, the private equity firm that originally bid $768 million for the futures brokerage business and certain other subsidiaries, withdrew its offer during Refco's packed bankruptcy hearing held in the U.S. Bankruptcy Court for the Southern District of New York last week. The company withdrew the bid after the judge said he would only approve a sale agreement with J.C. Flowers if a break-up fee was reduced to $5 million from more than $20 million.
Refco has received bids from Interactive Brokers Group and the Dubai Investment Group. Six other companies are also considering bidding for the unit, including Apollo Management and Marathon Asset Management. Bidders have also expressed interest in Refco's unregulated businesses, which filed for Chapter 11, and are evaluating them as part of the bid process, according to a company release. A trader said the bids for the company have settled investors, which panicked after Phillip Bennett, former ceo, was suspended for committing securities fraud. Many withdrew their investments after the news. "The value of the bids show that it is a viable company," he said.
Refco emphasized that the new bids underscore the value of the business. "The strong and growing interest in the sale of Refco's regulated subsidiaries, in particular, is evidence of the widespread recognition within the financial community of the value of Refco as a viable, going-concern business," said William Sexton, the new ceo, in a release.