================================================================= REFCO BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) October 19, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- REFCO BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Lee Ria E. Villahermosa, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of REFCO BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO REFCO BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF REFCO INC. [00002] REFCO GROUP LTD.'S BALANCE SHEET AS OF MAY 31, 2005 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] REFCO INC.'S CHAPTER 11 DATABASE [00005] LIST OF REFCO'S 50 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] STIPULATION CONVERTING CAPITAL MARKETS ACCOUNTS AT JPMC [00008] REFCO'S MEMORANDUM OF UNDERSTANDING WITH J.C. FLOWERS KEY DATE CALENDAR ----------------- 10/17/05 Voluntary Petition Date 10/21/05 Deadline for Refco to File Flowers Sale Motion 10/31/05 Deadline for Court to Approve Flowers Bidding Procedures 11/01/05 Deadline to File Schedules of Assets & Liabilities 11/01/05 Deadline to File Statements of Financial Affairs 11/01/05 Deadline to File Lists of Leases and Contracts 11/06/05 Deadline to Provide Utilities With Adequate Assurance 11/10/05 Deadline for Court to Approve Flowers Sale Transaction 11/11/05 Deadline for Closing Flowers Sale (unless extended) 12/11/05 Drop Dead Deadline for Closing Flowers Sale Transaction 12/16/05 Deadline to make decisions about lease depositions 01/15/06 Deadline to remove actions under FRBP 9027 02/14/06 Expiration of Exclusive Plan Proposal Period 04/15/06 Expiration of Exclusive Solicitation Period 10/17/07 Deadline to Commence Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO REFCO BANKRUPTCY NEWS ----------------------------------------------------------------- REFCO BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of REFCO BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) REFCO BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of REFCO BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF REFCO INC. ----------------------------------------------------------------- Refco, Inc. One World Financial Center 200 Liberty Street, Tower A New York, New York 10281 Tel: (212) 693-7000 http://www.refco.com/ Refco Inc. and its direct and indirect subsidiaries provide execution and clearing services for exchange-traded derivatives. Refco is a major provider of prime brokerage services in the fixed income and foreign exchange markets. The Company offers its customers rapid, low-cost trade execution and clearing services on a broad spectrum of derivatives exchanges and over-the-counter markets. In 2004, the Company was the largest provider of customer transaction volume to the Chicago Mercantile Exchange, the largest derivatives exchange in the United States. The Company serves accounts from over 20 locations in over 10 countries. Its customers include corporations, government agencies, hedge funds, managed futures funds, pension funds, financial institutions, retail clients and professional traders. In August 2005, Refco issued equity securities in an initial public offering. On October 10, 2005, Refco discovered through an internal review a $430,000,000 receivable owed to the Company by an entity controlled by Phillip R. Bennett, its Chief Executive Officer and Chairman of the Board of Directors. The receivable has since been collected. At the request of the Board of Directors of Refco, Mr. Bennett has taken a leave of absence. Also on October 10, 2005, Refco appointed a new President and a new Chief Executive Officer. On October 13, 2005, the Company assured its clients that its regulated subsidiaries were substantially unaffected by these events, and the business at these regulated subsidiaries was being conducted in the ordinary course, including customer deposit and withdrawal of segregated funds. The Company also said that the liquidity within its non-regulated subsidiary, Refco Capital Management, which represents a material portion of the business of the Company, was no longer sufficient to continue operations. The Company therefore imposed a 15-day moratorium on all activities of RCM to protect the value of the enterprise. Dennis Klejna, Esq., the Company's executive vice president and general counsel, relates that in a very rapid time period, and with extraordinary efforts, Refco and a private equity group lead by J.C. Flowers & Co. LLC negotiated an agreement to sell the Company's core futures brokerage business. The agreement generally provides that the buyers, which also include Silver Point Capital, MatlinPatterson Global Advisers LLC and Texas Pacific Group, will purchase the equity interest in Refco LLC, along with certain other subsidiaries, for a purchase price based on the net regulatory capital of the acquired entities. The agreement also provides for customary buyer protections, and requires Bankruptcy Court approval of the transaction on an expedited basis. In connection with the transaction, Refco and 23 of its subsidiaries have filed for protection under Chapter 11 of the United States Bankruptcy Code. Mr. Klejna emphasizes that none of Refco's regulated subsidiaries, including futures commission merchant Refco LLC and broker dealer Refco Securities, LLC, is a debtor, and their operations are continuing. Mr. Klejna indicates that the company is not in a position to estimate cash receipts and disbursements for the next 30 days. Mr. Keljna says that the company's average payroll expenses for the first half of 2005 were $711,000 per week. This may vary for the next 30 days. ----------------------------------------------------------------- [00002] REFCO GROUP LTD.'S BALANCE SHEET AS OF MAY 31, 2005 ----------------------------------------------------------------- REFCO GROUP LTD., LLC, AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) As of May 31, 2005 Cash and cash equivalents $405,029,000 Cash and securities segregated under federal and other regulations: Cash and cash equivalents 1,053,218,000 Securities purchased under agreements to resell 67,013,000 Securities purchased under agreements to resell 46,551,374,000 Deposits with clearing organizations 2,519,147,000 Receivables from securities borrowed 2,631,989,000 Receivables from broker-dealers and clearing organizations 10,770,348,000 Receivables from customers, net of reserves 1,807,446,000 Securities owned, at market or fair value 6,774,039,000 Memberships in exchanges 36,159,000 Goodwill 744,110,000 Identifiable intangible assets 595,931,000 Other assets 363,888,000 --------------- Total assets $74,319,691,000 =============== Liabilities Short-term borrowings, including current portion of long-term borrowings $144,913,000 Securities sold under agreements to repurchase 43,333,241,000 Payable from securities loaned 2,458,147,000 Payable to broker-dealers and clearing organizations 8,444,520,000 Payable to customers 7,622,809,000 Securities sold, not yet purchased 10,590,379,000 Accounts payable, accrued expenses and other liabilities 278,149,000 Long-term borrowings 1,236,000,000 --------------- Total liabilities 74,108,158,000 --------------- Commitments and contingent liabilities Membership interests issued by subsidiary and minority interest 23,606,000 Member's equity 187,927,000 --------------- Total liabilities and member's equity $74,319,691,000 =============== In its Chapter 11 petition, Refco Inc. and its affiliates reported to the Bankruptcy Court that as of February 28, 2005, their financial condition was: Total Assets: $48,765,349,000 Total Debts: $48,599,748,000 In a filing with the Securities and Exchange Commission, Refco Group Ltd., LLC, and its subsidiaries disclosed that their consolidated balance sheet as of May 31, 2005, reflects: Total Assets: $74,319,691,000 Total Debts: $74,108,158,000 As of August 31, 2005, Mr. Klejna reports, the Debtors' consolidated financial position was: Total Assets: $16.5 billion Total Debts: $16.8 billion ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- NEW YORK, New York -- October 17, 2005 -- Refco, Inc. announced today that it has entered into a memorandum of understanding with a group of investors led by J.C. Flowers & Co. LLC for the sale of the Company's futures brokerage business conducted through Refco LLC, Refco Overseas Ltd., Refco Singapore Ltd. and certain related subsidiaries and other assets. The investor group includes entities associated with J.C. Flowers & Co. LLC, The Enstar Group, Inc., Silver Point Capital, MatlinPatterson Global Advisers LLC, and Texas Pacific Group. The Company expects to execute definitive agreements shortly, although there can be no assurance that any definitive agreement ultimately will be reached or that a sale ultimately will be consummated. Mark Winkelman will serve as Chairman of Refco LLC, and Jacob Goldfield will serve as Vice Chairman. Mr. Winkelman was formerly head of J. Aron & Co. and co-head of the Goldman Sachs fixed income division. Mr. Winkelman said "We believe that Refco has a tremendously bright future ahead of it. Refco's unique platform offers clients a compelling value proposition, and we are providing Refco with a stable and well-capitalized shareholder base that will permit it to continue providing superior service to clients. We expect to close this transaction as soon as possible and we will begin our partnership with Refco employees immediately." In connection with the transaction, Refco Inc. and certain subsidiaries have filed for protection under Chapter 11 of the United States Bankruptcy Code on October 17, 2005. None of Refco's regulated subsidiaries, including the futures brokerage business conducted through Refco LLC, Refco Overseas Ltd. and Refco Singapore Ltd, and the registered broker dealer Refco Securities LLC have filed for bankruptcy protection. Refco expects that the Bankruptcy Court will enter an order establishing procedures for submission of competing proposals in due course. The proposed purchase price of $768 million equals 103% of the net capital of the acquired businesses. Refco will also have the option to retain up to 20% of the equity value of the entities being sold. Refco has filed a Form 8-K today with the Securities and Exchange Commission that includes the executed memorandum of understanding dated as of October 17, 2005. Greenhill & Co. LLC will continue as the Company's financial advisor. In accordance with the terms of its engagement, the services of Goldman, Sachs & Co. terminated on October 17, 2005, upon the bankruptcy filing. About Refco Inc. Refco Inc. (NYSE: RFX) is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. For more information, visit http://www.refco.com/ About J.C. Flowers & Co. LLC J.C. Flowers & Co. LLC is an investment firm specializing in financial services. About The Enstar Group The Enstar Group (Nasdaq: ESGR) is a publicly traded company engaged in the operation of several businesses in the financial services industry, including Castlewood Ltd., Bermuda. Mr. Flowers is the largest shareholder of Enstar. About Silver Point Capital Silver Point Capital specializes in credit analysis and diversified credit-related investments. About MatlinPatterson Global Advisors LLC MatlinPatterson is a private equity firm specializing in control investments in distressed situations on a global basis. About Texas Pacific Group (TPG) Texas Pacific Group is a global private equity firm investing in businesses across a range of industries. ----------------------------------------------------------------- [00004] REFCO INC.'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Refco Inc. One World Financial Center 200 Liberty Street, Tower A New York, New York 10281 Bankruptcy Case No.: 05-60006 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Bersec International LLC 05-_____ Kroeck & Associates, LLC 05-_____ Marshall Metals LLC 05-_____ New Refco Group Ltd., LLC 05-_____ Refco Administration LLC 05-_____ Refco Capital LLC 05-_____ Refco Capital Holdings LLC 05-_____ Refco Capital Management LLC 05-_____ Refco Capital Markets, LTD 05-_____ Refco Capital Trading LLC 05-_____ Refco Finance Inc. 05-_____ Refco Financial LLC 05-_____ Refco Fixed Assets Management LLC 05-_____ Refco F/X Associates LLC 05-_____ Refco Global Capital Management LLC 05-_____ Refco Global Finance Ltd. 05-_____ Refco Global Futures LLC 05-_____ Refco Global Holdings LLC 05-_____ Refco Group Ltd., LLC 05-_____ Refco Information Services LLC 05-_____ Refco Mortgage Securities, LLC 05-_____ Refco Regulated Companies LLC 05-_____ Chapter 11 Petition Date: October 17, 2005 Court: Southern District of New York Judge: Robert D. Drain Debtors' Counsel: J. Gregory Milmoe, Esq. Sally McDonald Henry, Esq. Richard B. Levin, Esq. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Tel: (212) 735-3000 Fax: (212) 735-2000 In its Chapter 11 petition, Refco Inc. and its affiliates reported to the Bankruptcy Court that as of February 28, 2005, their financial condition was: Total Assets: $48,765,349,000 Total Debts: $48,599,748,000 In a filing with the Securities and Exchange Commission, Refco Group Ltd., LLC, and its subsidiaries disclosed that their consolidated balance sheet as of May 31, 2005, reflects: Total Assets: $74,319,691,000 Total Debts: $74,108,158,000 As of August 31, 2005, Mr. Klejna reports, the Debtors' consolidated financial position was: Total Assets: $16.5 billion Total Debts: $16.8 billion ----------------------------------------------------------------- [00005] LIST OF REFCO'S 50 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Claim Amount ------ ------------ Bawag International Finance $451,158,506 BAWAG P.S.K. Bank fur Arbeit und Wirtschaft und Osterreichische Postsparkasse Aktiengesellschaft Sietzergasse 2-4 A-1010 Vienna, Austria P: +43/1/534 53/3 12 10 F: +43/1/534 53/ 2284 Wells Fargo $390,000,000 Corporate Trust Services Mac N9303-120 Sixth & Marquette Minneapolis, MN 55497 P: 612-3 16-47727 Attn: Julie J. Becker VR Global Partners, LP $380,149,056 Avora Business Park 77 SADOVNICHESKAYA NAB. BLDG. 1 Moscow, Russia 115035 Rogers Raw Materials Fund $287,436,182 C/O Beeland Management 141 West Jackson Blvd., Suite 1340 Chicago, IL 60604 P: (312) 264-4375 Bancafe International Bank Ltd $176,006,738 Carrera 11 82-76 Segundo 2 Bogota, Colombia P: 636-4349 - and - Bancafe International Bank Ltd 801 Brickell Ave. Ph1 Miami, FL 33131 P: 305-372-9909 F: 305-372-1797 Markwood Investments $110,056,725 Via Lovanio #19 00198 Rome, Italy Capital Management Select Fund $109,009,282 Lynford Manor, Lynford Cay Nassau, Bahamas Leuthold Funds Inc $107,264,868 Leuthold Industrial Metals, LP 100 North 6th Street Suite 412A Minneapolis, MN 55403 P: 612-332-9141 F: 612-332-0797 Attn: David Cragg Rietumu Banka $100,860,048 JSC Rietumu Banka Reg. No. 40003074497 VAT No. LV40003074497 54 Brivibas str Riga, LV-1011 LATVIA P: +371-7025555 F: +371-7025588 Cosmorex Ltd $91,393,820 CP 8057 28080 Madrid, Spain P: +34-607-745-555 F: +34-667-706-622 BCO Hipotecario Inv. Turistic $85,807,030 (Fidelicomiso Federal Forex Invest) Av Venezuela Torre Cremerca, Piso 2 Ofici B2 El Rosal Caracas, VENEZUELA VR ARGENTINA RECOVERY FUND $77,710,311 Avrora Business Park 77 Sadovnicheskayanab BLDG 1 Moscow, 115035 Russia Rogers International Raw Materials $75,213,814 c/o Beeland Management 141 West Jackson Blvd., Ste. 1340 Chicago IL 60604 P: (312) 264-4375 Creative Finance Limited $65,111,071 Marcy Building, Purcell Estate P.O. Box 2416 Road Town, British Virgin Islands Cargill $67,000,000 PO Box 9300 Minneapolis, MN 55440-9300 P: (952) 742-7575 F: (952) 742-7393 JWH Global Trust $50,576,912 c/o Refco Commodity Management Inc. One World Financial Center 200 West Liberty St., 22nd Floor New York, NY 10281 RB Securities Limited $50,661,064 54 Brivibas Street LV-1011 Riga, Lativa P: + 371 702-52-84 F: + 371 702-52-26 PREMIER TRUST CUSTODY $49,365,415 ABRAHAM DE VEERSTRAAT 7-A CURACAO, NETHERLANDS ANTILLES London & Amsterdam Trust Company $47,560,980 PO Box 10459 APO 3rd Floor Century Yard Cricket Square, Elgin Ave. Grand Cayman, Cayman Island Stilton International Holdings Trident Chambers, Wickhams Cay P.O. Box 146 Road Town, British Virgin Islands $46,820,415 Refco Advantage Multi-Manager Fund Futures Series $41,713,723 c/o Refco Alternative Investments Group One World Financial Center 200 West Liberty St., 22nd Floor New York, NY 10281 Banesco Ny Banesco Banco Universal C.A. $39,596,609 Av Urdaneta, Esquina El Chorre, Torre Untbanca Caracas Venezuela Josefina Franco Sillier $32,862,419 Carretera Mexico-Toluca No. 4000 Col. Cuajimalpa D.R. 0500 Mexico Rovida $32,831,461 London & Amsterdam Trust Company PO Box 10459 APO 3rd Floor Century Yard, Cricket Sq. Caja S.A. $30,950,115 Sarmiento 299 1 Subsuelo (1353) Buenos Aires, Argentina P: (54 11) 4317-8900 F: (54 11) 4317-8909 Global Management Worldwide $28,976,612 Trident Corp. Service Floor 1 Kings Court Bay St. PO Box 3944 Nassau, Bahamas Abadi & Co. Securities $28,046,904 375 Park Avenue, Suite 3301 New York, NY 10152 P: (212) 319 -4135 Refco Winton Diversified Futures Fund $27,226,697 c/o Refco Global Finance One World Financial Center 200 West Liberty Street, 22nd Floor New York, NY 10281 Pioneer Futures, Inc. $25,932,000 One North End Ave., Suite 1251 New York, NY 10282 Daichi Commodities CO., LTD. $24,894,833 10-10 Shinsen Cho, Shibuya-Ku Tokyo, I5O-0045 JAPAN GS Jenkins Portfolio LLC. $24,631,959 c/o Refco Capital Markets One World Financial Center 200 West Liberty Street, 22nd Floor New York, NY 10281 Winchester Preservation $23,349,765 c/o Joseph D, Freney Christiana Bank & Trust Co. 3801 Kennett Pike, Suite 200 Greenville, DE 19807 BANCO AGRI BANCO AGRICOLA (PANAMA) S.A. $22,314,386 EDIFICIO GLOBAL BANK #17, LOCAL F, CALLE 50 PANAMA, PA - and - BANCO AGRICOLA, S.A. 1RA. CAKKE PTE. Y 67 AV. NORTE FINAL BLVD CONSTITUCION #100 SAN SALVADOR, ES Peak Partners Offshore Master Fund Limited $22,205,344 PO Box 2199 GT Grand Pavilion Commercial Center 802 West Bay Road Grand Cayman, Cayman Islands Arbat Equity Arbitrage Fund $19,106,989 Trident Corporate Services 1st Floor Kings Court Bay Street P.O. Box N3944 Nassau, Bahamas Renaissance Securities (Cyprus) Ltd. $17,820,709 2-4 Arch Makarios 111 Avenue Capital Center, 9th Floor 1505 Nicosia Cyprus AQR Absolute Return $17,482,100 c/o Caledonian Bank & Trust LTD PO Box 1043 GT Caledonian House Grand Cayman, Cayman Islands Geshoa Fund $17,319,494 CORPORATE CENTER WEST BAY ROAD PO BOX 31106 SMB GRAND CAYMAN RK Consulting $14,074,345 7, Kountouriotou Street 14563 Kifissia Greece VR Capital Group Ltd. $13,690,549 AVRORA BUSINESS PARK CALENDONIAN HOUSE MARY STREET NAB 77 BLDG 1 MOSCOW RUSSIA 115035 P: +358 600 41 902 GTC Bank, INC. $12,971,439 CALLE 55 ESTE TORRE WORLD TRADE CENTER PISO 7 PANAMA GUATEMALA P: (507) 265-7371 F: (507) 265-7396 Inversiones Concambi $12,799,137 C/O AEROCAV 1029 P.O. BOX 02-5304 MIAMI, PL 33102 Miura Financial Services $12,150,213 AV. FRANCISCO DE MIRANDA TORRE LA PRIMERA PISO 3 CARACAS VENEZUELA NKB Investments LTD $11,699,430 199 ARCH MAKARIOS AVE 196 Makarios III Avenue Ariel Corner 3rd Floor Office 301 3030 Limassol CYPRUS Tokyo Forex Financial Inc $11,689,354 Shinjyuku Oak Tower, 35th Floor 6-8-1 Nishishinjyuku Shinjyuku-Ku, Tokyo JAPAN Birmingham Merchant S.A. $11,215,413 AV. ARGENTINA 4793 PISO 3 CALLAO PERU BAC International $10,906,506 CALLE 43 QNQUILLO DE LAGUAR PANAMA P: (507) 265-8289 F: 507-205-4031 Total Bank $10,657,732 CALLE GUAICAIPURO ENTRE AV.PRINCIPALDE IAS MERCEDES TORRE ALIANZA PISO 9 EL ROSAL, CAACAS, VENEZUELA P: (0212) 264.72.54/49.42 F: (0212) 266.58.12 Reserve Invest (Cypress) Limited $10,499,733 MAXIMOS PLAZA 3301 BLOCK 3 3035 LIMASSOL CYPRUS Refco Commodity Futures Fund $10,166,045 c/o Refco Alternative Investments Group One World Financial Center 200 Liberty Street, 22nd Floor New York, New York 10281 P: 877 538 8820 F: 877 229 0005 ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Refco Inc. and its 23 debtor-affiliates anticipate that numerous notices, applications, motions, other pleadings, hearings, and orders in their chapter 11 cases will affect several of the Debtors. Thus, the Debtors ask the Court for an order directing joint administration of their Chapter 11 cases. According to J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in New York, the joint administration of the Debtors' Chapter 11 cases will permit the Clerk of the Court to use a single general docket for each of the Debtors' cases and to combine notices to creditors and other parties-in-interest of the Debtors' estates. The Debtors propose that all pleadings and papers filed in their jointly-administered Chapter 11 cases be captioned: ____________________________________ | In re | Chapter 11 | Refco Inc. et al., | Case No. 05-60006 (RDD) | Debtors. | (Jointly Administered) | ____________________________________| According to Mr. Milmoe, the use of simplified caption, without reference to the Debtors' states of incorporation and tax identification numbers, will eliminate cumbersome and confusing procedures and ensure a uniformity of pleading identification. Rule 1015(b) of the Federal Rules of Bankruptcy Procedure provides that if two or more petitions are pending in the same court by or against a debtor and an affiliate, the court may order joint administration of the estates of the debtor and those affiliates. Mr. Milmoe tells Judge Drain that Refco and its debtor-affiliates are "affiliates" as that term is defined in Section 101(2) of the Bankruptcy Code and as used in Bankruptcy Rule 1015(b). Thus, he says, joint administration of the Debtors' Chapter 11 cases is appropriate under Bankruptcy Rule 1015(b). Mr. Milmoe points out that joint administration will protect parties-in-interest by ensuring that they will be apprised of the various matters before the Court in the Debtors' cases. In addition, the creditors' rights will not be adversely affected by joint administration since the Debtors' request is purely procedural and is in no way intended to affect substantive rights. ----------------------------------------------------------------- [00007] STIPULATION CONVERTING CAPITAL MARKETS ACCOUNTS AT JPMC ----------------------------------------------------------------- Debtor Refco Capital Markets, Ltd., maintains multiple bank accounts at JPMorgan Chase Bank, N.A., in U.S. dollars and various foreign currencies, including accounts maintained in the United States and abroad. As of the Petition Date, some of these accounts had positive balances while others were overdrawn. Capital Markets and JPMorgan agree that all of the Debtor's accounts denominated in currencies other than U.S. dollars should be converted to U.S. dollars to avoid risks related to fluctuations in various currencies' values. Upon conversion of all of the accounts to U.S. dollars, Capital Markets and JPMorgan agree to state a combined balance between Capital Markets and the Bank by netting the result of the conversion of all non-U.S. dollar accounts to U.S. dollars in accounts maintained with the Bank. Accordingly, Capital Markets asks the Court to authorize JPMorgan to convert all of its accounts at the Bank that are denominated in currencies other than U.S. dollars to U.S. dollars. Upon the conversion of all Capital Markets accounts at JPMorgan, the Bank will promptly provide an accounting to Capital Markets of the foreign currencies converted in each account, the applicable conversion rates, fees, if any, and the total dollars derived, along with a reconciliation reflecting the netting all of the Capital Markets accounts at the Bank. Capital Markets asks the Court to modify the automatic stay under Section 362 of the Bankruptcy Code, to the extent necessary, to permit JPMorgan to convert the Capital Markets accounts. JPMorgan is represented in the Debtors' cases by Andrew D. Gottfried, Esq., at Morgan, Lewis & Bockius LLP, in New York. ----------------------------------------------------------------- [00008] REFCO'S MEMORANDUM OF UNDERSTANDING WITH J.C. FLOWERS ----------------------------------------------------------------- On October 17, 2005, Refco Inc. entered into a memorandum of understanding with J.C. Flowers & Co. LLC. The MOU outlines the principal terms and conditions upon which FGS Refco Acquisition Co., LLC, a Delaware limited liability company organized by: -- J.C. Flowers, -- J. Goldfield & Co., LLC, -- Silver Point Finance, LLC, -- MatlinPatterson Global Advisers LLC, and -- TPG Partners IV, LP, proposes to acquire all of the capital stock and operations of Refco, LLC, and certain of its affiliates including Refco Overseas Limited, and Refco Singapore, which are engaged in the regulated futures and commodities trading activities, from Refco, Inc., and Refco Global Futures LLC. The purchase price will be equal to 103% of the net regulatory capital of the Acquired Business as of closing plus, any amounts payable in respect of additional assets purchased. The net regulatory capital of the Acquired Business is currently $746,000,000, so if the capital remains unchanged, the purchase price at closing will be $768,000,000. The Debtors will have the right to retain up to 20% of the equity of the Subsidiaries. The Purchase Price will be payable in cash, provided, that to the extent that the Purchase Price exceeds $900 million, the excess Purchase Price will be in the form of an unsecured note on commercially reasonable terms. The Debtors agree to file a sale motion on or before October 21, 2005. The Sale Motion will seek these buyer protections: (a) reimbursement of Sponsors' reasonably documented expenses up to $5,000,000 in the aggregate; (b) a break-up fee equal to 2.8% of the Purchase Price to be paid in the event the Debtors sell the assets to a buyer other than FGS Refco; and (c) bid procedures for the auction of the Acquired Business, including (i) a $20 million overbid requirement of any qualified bid, (ii) a requirement that any qualified bidder be reasonably acceptable to the Company's designated self-regulatory organization, the Chicago Mercantile Exchange, and (iii) to the extent that any other bidder in the bankruptcy auction offers to employ fewer employees than the Buyer, the additional severance cost incurred by Debtors will be reflected in the calculation of the price offered by the other bidder. The hearing to consider the proposed Bid Procedures must be held no later than October 31, 2005. The Debtors must obtain Court approval of the sale no later than November 10, 2005. Subject to one 30-day extension, Refco is required to close the transaction no later than November 11, 2005. Either party will have the right to terminate the MOU by giving notice to the other party in the event that an Acquisition Agreement has not been executed on or before October 24, 2005. A full-text copy of the Memorandum of Understanding is available for free at: http://www.sec.gov/Archives/edgar/data/1321746/000095017205003277/ex99_2.txt *** End of Issue No. 1 ***