On March 20, spot currency brokerage Forex Capital Markets (FXCM) announced it had ended negotiations with the creditors to acquire the assets of Refco F/X Associates, the unregulated currency trading arm of bankrupt clearing firm Refco.
Refco F/X Associates customers have been in limbo unable to retrieve their frozen account funds since Refco collapsed because of an accounting scandal on the heels of its successful IPO last year.
In November 2005 FXCM agreed to acquire Refco F/X Associates for approximately $110 million through an auction process and subject to bankruptcy court approval. Although it won the auction in February 2006 (it was the only firm that made an actual bid), Refco’s creditors rejected FXCM’s bid as too low. After raising its bid to $130 million, FXCM claimed in a press release that Refco has been “unresponsive to FXCM.”
“While our hope remains to effect a transaction, the creditors’ demands remain unreasonable and their position inflexible,” the press release quotes FXCM Chief Executive Officer Drew Niv as saying. “They leave us no choice but to abandon negotiations at this time.”
Despite the fracture, FXCM’s announcement seems to leave open the possibility of future negotiations.
“We have done everything in our power to rescue the clients of Refco FX Associates,” Niv says. “From the very beginning our purpose has been to make their 17,000 clients whole. If successful, our efforts would have meant that every one of the 17,000 Refco F/X customers would have been paid back in full.”
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