Tuesday, October 11, 2005


Derivative Giant Refco On The Ropes

The shares of derivatives trader Refco, Inc. had the halt lifted this afternoon and over 10 million shares quickly traded. "Commodities broker Refco Inc., on Tuesday said its recently removed chief executive took steps to inflate the company's balance sheet, in a scandal than has more than halved Refco shares in two days."

"Following a more than five-hour trading halt, Refco shares fell $2.60, or 16.7 percent, to $13.00 in afternoon trading on the New York Stock Exchange, after declining 45 percent on Monday. The shares had closed Monday at 29 percent below their $22 IPO price."

"One of the most prominent U.S. securities class-action law firms..sued Refco in a New York federal court. Jeff Harte wrote that Banc of America Securities, Credit Suisse First Boston and Goldman Sachs & Co., the lead underwriters on Refco's IPO, would face lawsuits 'sooner rather than later.'"

"Late Monday, Moody's Investors Service downgraded Refco affiliates to medium and low 'junk' grades, two weeks after saying it might raise those ratings. Moody's said it has 'serious concerns' about Refco's internal controls and questioned its corporate governance, and said more downgrades are possible. Rating agency Standard & Poor's downgraded Refco on Monday, and also said another downgrade is possible."

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