Market Updates

Refco Negotiates with Customers

Elena
05 Jul, 2006
New York City

    However, a single holdout customer retains the power to spoil the agreement. If the certain commodities trader doesn''t agree to join the deal within two weeks, court proceedings would begin to liquidate Refco Capital Markets.

[R]8:00AM Refco neared a deal with customers from Bermuda unit.[/R]
One of the U.S. biggest commodity brokerages Refco and nearly two dozen subsidiaries collapsed into bankruptcy proceedings, following an accounting scandal last year. Resolution of those cases has been complicated by dozens of lawsuits filed by RCM customers and creditors.
Over 50 customers of Refco Inc.''s unregulated Bermuda unit struck a deal that would allow them to retrieve $2.3 billion from the unit. However, a single holdout customer retains the power to spoil the agreement. If the certain commodities trader doesn''t agree to join the deal within two weeks, court proceedings would begin to liquidate Refco Capital Markets.

Under the settlement, RCM customers holding securities accounts would recover more than 70% of the value of their claims. Customers who hold foreign-exchange accounts would get more than 26% of the value of their claims. The foreign-exchange customers would get an advance payment of $221 million once the deal takes effect. A third class of customers would get back the precious metals they deposited with RCM, or the proceeds from the sale of those metals.

Nearly two dozen customers, including Moscow-based hedge fund VR Global Partners and U.S. food company Cargill Inc., have signed the pact, but the customer with the single biggest claim against RCM hasn''t agreed. If an agreement can''t be reached within two weeks, RCM''s bankruptcy case will be converted from a Chapter 11 reorganization to a Chapter 7 liquidation.


[R]7:30 AM Asian markets fell in the wake of North Korea missile launches.[/R]
Asian markets finished lower on Wednesday. The Japanese Nikkei 225 Index led the decline, shedding 0.73% to end the day at 15523.94. Exporters led Japanese decliners Wednesday. Nikon lost 0.49%, while Nintendo slumped 2.76%. Auto makers also suffered, with Honda plunging 2.17% and Toyota losing 1.16%. Nissan, whose board Monday announced it was open to bringing General Motors into its partnership with Renault, declined 1.9%. The Korea Composite Stock Price Index, In Seoul, sank 2.1% in opening minutes amid worries over the North Korea missile test, but then rebounded into positive territory briefly before slipping back. The benchmark index finished the session down 0.5% at 1279.85. The Hang Seng Index in Hong Kong fell 0.62% to 16267.18. Fixed-line phone company PCCW shed 0.89% amid concerns that negotiations over the potential sale of its telecom and media assets were at an impasse. China Netcom, which holds a 20% stake in PCCW and opposes the sale of the Hong Kong company''s core assets to foreign bidders, dropped 3.87%. China''s benchmark Shanghai Composite Index surged 2.2% as the Bank of China''s initial public offering of yuan-denominated Class A shares made its trading debut in Shanghai. Elsewhere around the region, Taiwan''s Weighted index shed 1.11%. Australia''s S&P/ASX 200 edged down 0.15%.


[R]6:30AM Europe fell by mid-morning on bank statement and North Korea scare.[/R]
European markets traded lower by mid-morning on Wednesday. The U.K. FTSE 100 index shed 0.4% at 5,860, the German DAX Xetra 30 index slipped 0.5% at 5,700 and the French CAC-40 index dropped 0.5% at 4,960. Among the decliners was British bank Alliance & Leicester losing 6.3% in London in the wake of France''s Credit Agricole announcement that it decided not to make an offer for Alliance & Leicester. Agricole slipped 0.3%. Tire makers, Continental and Michelin, each lost more than 1.5%, after Japan''s Sumitomo Rubber warned on 2006 profitability levels following higher raw material costs. Advancers included Irish building materials company CRH gaining 1.2% after it said that, due to an improved performance in each of its business segments. France''s Scor also advanced 4% after agreeing to buy German reinsurer Revios for 605 million euros ($775 million) from Globale Re.

Light sweet crude oil was traded over $73 a barrel, down 51 cents at $73.42. Gold was fixed in London at a recommended price of $625.75 bid per troy ounce at midmorning, up from $621.80 late Tuesday. Silver traded in London at $11.28 per troy ounce, up from $11.24. The dollar was up against the European currency. The euro traded at $1.2762, down from $1.2791 late Tuesday in London. The British pound traded at $1.8439, down from $1.8446. The dollar bought 115.04 Japanese yen, up from 114.58.

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