Flowers' power

18 October 2005 By Antony Currie Follow @AntonyMCurrie

Former Goldman partner Christopher Flowers offer of $768m for Refco s futures unit may leave nothing for shareholders. Given Goldman s numerous conflicts of interest, outsiders will want to know whether Flowers got too good a deal.

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Refco Inc filed for bankruptcy Monday night. At the same time it announced that it has entered into a memorandum of understanding with a consortium of investors led by JC Flowers and Co to sell its regulated futures broking business for $768m, or 103% of net capital. Neither the futures broker up for sale, nor the regulated subsidiary Refco Securities is among the subsidiaries that filed for bankruptcy, but as an asset of the parent company that has filed any sale will be conducted as an auction by the bankruptcy courts and Greenhill, Refco's advisor.

Flowers was until 1998 a partner at Goldman Sachs, the investment bank that was a lead underwriter on Refco's IPO and acted as advisor to Refco until the bankruptcy filing. An earlier Flowers investment was in Conseco, another company owned by Thomas H Lee, the private equity firm that still has a 38% stake in Refco. Edward Mule, principal at Silver Point Capital, one of the firms joining Flowers in bidding for Refco, spent 17 years at Goldman. Another former Goldman partner, Mark Winkelman, has been appointed chairman of the unit up for sale. Winkelman was head of fixed income at Goldman, and before that used to run J Aron & Co, the number one commodities and futures trading business Goldman bought in 1981. Jacob Goldfield, who spent 16 years at Goldman, has been appointed vicechairman.

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