US finance firm Refco has filed for bankruptcy protection and agreed to sell its futures brokerage business to buy-out specialist JC Flowers & Co.
The move for Chapter 11 bankruptcy protection will allow Refco time to get its finances in order.
Refco has been in trouble since its former chief executive was charged with fraud and concealing a $430m loan ahead of a stock market floatation.
The bankruptcy would be one of the biggest in US business history.
Bits and pieces
Refco said that the three units it planned to sell to JC Flowers - which include the brokerage Refco LLC - had not been put under Chapter 11 protection.
"Those businesses are solvent and the customers' assets are safe," said Christopher Flowers, the former Goldman Sachs partner who heads up JC Flowers.
"The parts of Refco are greater than the whole. There's been too much damage to turn it around"
Speaking on CNBC, Mr Flowers added that the company has an option to buy the rest of Refco and is looking to see if it can resuscitate all of its businesses.
JC Flowers has agreed to pay $768m for the units it is buying, though Refco will be allowed to keep up to 20% of the equity value of the subsidies being sold.
Refco is expected to invite offers for the rest of the business.
"I think, in this case, the parts of Refco are greater than the whole," said Denise Valentine of consultancy group Celent. "There's been too much damage to turn it around and revive it."
Pushed out
Until its problems, Refco was a market maker for commodities and financial futures, one of the biggest of the companies providing liquidity to ensure that traders would be able to buy and sell contracts.
But its reputation was left in tatters, and its share price tumbled, after charges were levelled against former boss Phillip Bennett.
Mr Bennett is accused of hiding the fact that Refco Capital Markets - an unregulated subsidiary he controlled - owed $430m to its parent company through a series of undisclosed transactions.
The $430m has since been repaid but the arrangement was not revealed at the time of Refco's flotation, calling the company's future into question.
Mr Bennett faces up to 20 years in jail if found guilty of securities fraud.
Refco shares have been suspended since the scandal emerged and the New York Stock Exchange said it would delist them now the company had filed for Chapter 11 protection.
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