Refco Sends $82 Million to Old Owners

They take care of their own at Refco(RFX Quote).

Investors in the derivatives brokerage's $583 million initial public offering, however, went hungry when it came time for the New York firm to pay a special $82.2 million dividend on Aug. 18. The New York-based broker disclosed Friday that the dividend, which was paid out a week after the IPO, went to shareholders of record before the stock offering.

One of the biggest beneficiaries of the additional payout was Thomas H. Lee Partners, the Boston-based buyout firm that has a 40% post-IPO equity stake in Refco. Before the IPO, Thomas Lee had a 49% stake in Refco, which it acquired in return for a $507 million investment in the brokerage last August.

Another recipient was Refco Chairman and CEO Phillip Bennett, who owns 33% of the brokerage's stock following the offering.

Officials with Refco and Thomas Lee did not return phone calls.

Refco paid the special dividend with the proceeds it received from a decision by the underwriters of the IPO to exercise an option to purchase an additional 3.75 million shares. The lead underwriters, Credit Suisse First Boston, Goldman Sachs and Bank of America, exercised the option on Aug. 16, five days after the IPO was completed.

The additional shares picked up by the Wall Street banks were sold by Refco, not Thomas Lee and the other original shareholders.

The company said in a filing before the IPO that it would pay the former owners an unspecified sum to "meet their estimated income tax obligations for the period from Jan. 1, 2005, to the date of the reincorporation" of the company.

News of the bonus payment to Refco's pre-IPO investors didn't do much to deter the stock's performance in the aftermarket, however. In midday trading Friday, shares of Refco were up 16 cents to $26.97. The stock is up 23%, since its debut on the New York Stock Exchange.