Reply #132: Refco scandal bad news for Thomas H. Lee Partners LP [View All]

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid=%7BB3D6939D%2DA717%2D4DD5%2DA34D%2D0861CC942B3A%7D&siteid=mktw

BOSTON (MarketWatch) - Thomas H. Lee Partners LP, the Boston-based buyout firm that made a bundle on Snapple, may have lost hundreds of millions of dollars on its investment in embattled futures broker Refco Inc.

Shares of Refco(RFX: news, chart, profile) fell as much as 27% Thursday before the New York Stock Exchange halted trading. Refco's ousted Chief Executive Phillip Bennett was arrested Wednesday and charged with securities fraud for his alleged role in a plan to dupe investors in Refco's August initial public offering.

The buyout firm, referred to by Hoover's Inc. as "the teddy bear at the gate" because it pursues companies that want to be pursued, in 2004 acquired a "major" ownership stake in Refco. Although financial terms of the deal weren't disclosed, the transaction valued the company at about $2.25 billion, according to a Refco release in June 2004.

An August Securities and Exchange Commission filing showed Thomas H. Lee held about 49 million Refco shares. The shares, which went public at $22 per share, traded at $7.90 Thursday before they where halted.

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Geoff Bobroff, a mutual fund industry consultant based in East Greenwich, Rhode Island, said Lee is "a very large deal in the private-equity world," and the Refco scandal comes at an "awkward" time for him given that his firm is reportedly trying to raise some $7.5 billion for a new fund.

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