Dow Jones – Refco Inc.’s (RFX) creditors said disappointment awaits a group of hedge funds that has bet on a “substantial” payoff in the company’s bankruptcy case.<\/p>\n
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The hedge funds, including JMB Capital Partners and Lonestar Capital Management LLC, hold more than 25% of Refco’s stock. Much of that stock was purchased after Refco tumbled into bankruptcy last October, court documents show.<\/p>\n
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In papers filed with the U.S. Bankruptcy Court in Manhattan, the hedge funds have argued it’s “virtually tautological” that Refco will have “substantial assets” available for distribution to them and other shareholders once it wraps up its bankruptcy case.<\/p>\n
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But Refco’s committee of unsecured creditors, which is working with the company to retrieve assets lost as the company was collapsing last year, said the hedge funds misunderstood Refco’s finances. Refco stockholders can expect to recover next to nothing, the creditors said in court papers filed Friday.<\/p>\n
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“Refco shareholders, far from being the recipients of a substantial ‘liquidating dividend,’ appear to be at least hundreds of millions of dollars out of the money,” the committee said.<\/p>\n
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The committee asked U.S. Bankruptcy Judge Robert Drain to reject the hedge funds’ request to appoint a committee to represent stockholders’ interests. It said the appointment of such a committee would be a waste of time and money.<\/p>\n
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Drain is scheduled to hold a hearing on the request June 8<\/p>\n