Refco Bids Are Evaluated

The brokerage is considering which of eight offers constitute qualified bids.
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The five firms seeking to buy the best of what's left of

Refco

(RFCQ.PK)

should know by day's end whether they're still in the running.

The scandal-tarred commodity and derivatives brokerages is in the process of deciding which of the offers constitute "qualified bids'' and can participate in the auction process scheduled for Wednesday.

Sandi Sternberg, a Refco spokeswoman, says the company is considering a prospective buyer's "financial and related ability to close the sale quickly.''

Refco announced late Friday that it had received five bids to buy "some or substantially all of Refco's assets.'' The company did not identity the bidders, most of whom are seeking to acquire the firm's still-solvent futures brokerage business.

The five bids are fewer than had been expected. In the days leading up to the submission of bids, as many as eight groups had indicated they would enter the bidding process.

Over the weekend,

Man Group

, the London-based hedge fund giant, and Alaron, a Chicago futures and options broker, confirmed that they had submitted bids. It's believed that Interactive Brokers Group, another futures firm, and an investment group led by the Dubai government also submitted bids.

Before the bidding process, Interactive Brokers offered to pay $858 million for Refco's futures business. The firm's offer topped an $828 million bid by J.C. Flowers, the hedge fund with which Refco reached a preliminary agreement just before filing for bankruptcy protection last month. J.C. Flowers, after much criticism, withdrew from the agreement, but there's been speculation it could get back into the bidding war.

Refco is hoping to raise close to $1 billion in the auction, which will be overseen by the bankruptcy court, in order to raise cash to pay off some of its creditors, who have $16 billion in outstanding claims against the firm. In the bankruptcy proceeding, the roughly $1.4 billion in debts owed to Refco's banks and bondholders will get paid off before claims by shareholders and the brokerage's customers.

Refco filed for bankruptcy a week after the firm disclosed that former CEO Phillip Bennett had been hiding at least $430 million in debt in a private company he controlled. Federal prosecutors have charged Bennett with one count of securities fraud.