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Cerberus Buys Bawag

The scandal-tarred Austrian lender goes for $4 billion.
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Buyout firm

Cerberus Capital Management

is the winner in the bidding for Austria's Bank Fuer Arbeit und Wirtschaft, the scandal-tarred bank that played a big role in the collapse of

Refco

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Cerberus, based in New York, specializes in investing in distressed properties. A consortium led by Cerberus was one of four bidders for Bawag, as the lender is known. The sale of Bawag was managed by

Morgan Stanley

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It's not clear how much Cerberus is paying for Bawag. But the

Austria Press Agency

says the private equity firm is paying at least 3.2 billion euros, or $4.2 billion.

Bawag, which once had a significant ownership stake in Refco, allegedly helped the defunct broker's former CEO hide nearly $750 million in bad debts and receivables. As part of a non-prosecution agreement with federal prosecutors, Bawag agreed to pay at least $675 million in restitution.

Bawag had a secret deal with Refco's former CEO, Phil Bennett, which entitled it to a larger then publicly acknowledged payout from the 2004 LBO of Refco. Authorities allege the Austrian bank got nearly $800 million of the proceeds from the $1.8 billion buyout orchestrated by Thomas H. Lee Partners.

Refco collapsed in October 2005, just three months after it raised $583 million in an IPO.