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Leucadia National Corporation and FXCM Announce $300 Million Financing to Permit FXCM to Continue Normal Operations
NEW YORK--(BUSINESS WIRE)-- Leucadia National Corporation (NYSE: LUK) and FXCM (NYSE: FXCM) today announced that Leucadia would be providing $300 million in cash to FXCM and its subsidiaries (collectively "FXCM") that will permit FXCM to meet its regulatory-capital requirements and continue normal operations after yesterday's loss of $225 million due to the unprecedented actions of the Swiss National Bank. Under the terms of the agreements, Leucadia is investing $300 million in cash into FXCM in the form of a $300 million senior secured term loan with a two-year maturity and an initial coupon of 10%. The term loan obligations are guaranteed, on a secured basis, by certain of FXCM's domestic subsidiaries. In addition, Leucadia will receive, in the event of a sale of FXCM or its subsidiaries, a certain percentage of the sale proceeds and, in the event FXCM makes other distributions on account of its equity, a corresponding payment for its own account. This transaction is expected to close this afternoon. Drew Niv, Chief Executive Officer of FXCM, stated: "We could not be more grateful to Leucadia and its team for their rapid and effective response and to our regulators, who have been willing to work with us through this challenging process. Leucadia's support and this financing are by far the best alternative for FXCM, our customers, our shareholders, and all other relevant constituencies. We are pleased to continue to act as the leading online provider of foreign exchange trading and related services to retail and institutional customers worldwide."
Through Thursday, January 22, FXCM's month-to-date retail customer trading volume, which includes all retail FX and CFD volume, is $406 billion* with 30% coming from the last 5 days alone, which included a U.S. bank holiday. Average retail customer trading volume per day during this period is $27 billion.* As of January 22, tradable accounts were 224,547, and client equity was $1 billion.
"A week after the unprecedented movement of the Swiss Franc, and our financing agreement with Leucadia, FXCM continues to operate in the normal course of business. All of our entities have capital in excess of regulatory requirements. As our month-to-date metrics show, FXCM continues to be a global leader in retail FX with volumes on pace to set a record. We are especially thankful for our customers' loyalty and support," said Drew Niv CEO of FXCM.
Niv continued, "The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business while reducing our debt through the sale of non-core assets. We anticipate that the proceeds from these sales and continued earnings, we can meet both near and long term obligations of our financing, while preserving the strength of our franchise."
Richard B. Handler, Chief Executive Officer, and Brian P. Friedman, President of Leucadia, commented: "We view FXCM as our next opportunity to work with an investee company to create long-term value for all stakeholders, including FXCM's dedicated employees and customers. We look forward to assisting Drew Niv and his team to develop the liquidity opportunities to repay last week's emergency financing and then, as the long-term investors we are, to exercising the patience and diligence needed to maximize the value of FXCM over time as we strive to do for every investment in our portfolio, many of which we have held for the long term, and, in some cases, for over a decade."
*Amount excludes volume generated by clients with negative balances following the Swiss National Bank's decision to abandon the maximum exchange rate of 1.2 Swiss Francs per Euro.
As our CEO Drew mentioned, thank you to our traders for your continued support. I appreciate your patience while we work on answers to your most pressing questions, and I will continue to provide more information as I am able to.
Have a great weekend!
Jason
If you have questions about our services at FXCM please send me a Private Message.
I'm rooting for you guys because I think you have done great things to open up the retail forex market. That said, and as someone looking in from the outside, I think pursuing the negative balance thing is a big mistake, especially after saying that in general, you wouldn't do that. You've built up an excellent name over time, don't trash it. Consider yourselves lucky to have survived the Swiss Franc tsunami, rebuild, and move on...
My gut feeling is maybe 10% of the customers make up 90% of the losses.
I could be way off. But if correct, they are probably making a blanket statement per the agreement of the rescue, to try and go after those big accounts.
I agree with you that this is probably part of the rescue agreement, and if indeed it is about going after 10% to make up for 90% of losses, then it would be understandable and make sense, as it would allow them to survive which would be better for retail fx in general. In that case, Leucadia should have the good sense to allow them to make that case...