Global Brokerage is filing for a chapter 11, an official announcement distributed via the company’s investor relations website states. The company is entering into a restarting agreement with about 70 percent of its note holders.
The firm will also delist from NASDAQ and is parting ways with several directors and executives.
Global Brokerage is undergoing the restructuring of its obligations in order to stabilise after a tumultuous couple of years since the company got hit by the Swiss National Bank debacle. The former shareholder of FXCM Group, Global Brokerage and its affiliate, Global Brokerage Holdings, LLC, have negotiated with holders of more than 68.5 percent of the company’s convertible notes to reach the restructuring agreement.
The agreement also includes FXCM and Leucadia. The obligations of Global Brokerage and Global Brokerage Holdings will be restructured under the Chapter 11 of the United States Bankruptcy Code.
According to the plan, Global Brokerage will extend the maturity on its current debt obligations for five years after the conclusion of the bankruptcy proceeding. The effort aims to optimise operations to cut current expenses.
FXCM not a Part of the Bankruptcy Proceeding
FXCM Group is not involved with the Chapter 11 filing. The clients of FXCM and client funds will not be impacted by the restructuring agreement. The banking and trading counterparties, service providers, and other business relationships of the brokerage won’t be impacted.
As such, the ongoing changes at Global Brokerage will not change anything for FXCM Group. The companies have distanced themselves from each other, starting from August this year. At the time a filing with the SEC outlined that FXCM’s only debt is its loan obligation to Leucadia. At the time, $66.7 million was outstanding.
Back in October FXCM Group and Global Brokerage Holdings, LLC announced that the management agreement between the firms was terminated.
Restructuring Agreement for Global Brokerage
The current notes that creditors of Global Brokerage own will be exchanged for an equal amount of a new series of senior secured notes. The paper is due for repayment five years after the company emerges from chapter 11 protection.
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The New Secured Notes by Global Brokerage Holdings will be guaranteed and accrue cash interest at a rate of 7% per annum. The company will be prohibited from incurring additional debt and engage in asset sales.
Meanwhile, the credit agreement between Global Brokerage Holdings and FXCM Group, as borrowers, and Leucadia, as the lender, will be extended by twelve months.
The company states that under the restructuring plan, the rights of the holders of Global Brokerage’s common stock will be unimpaired. Under the plan, excess cash generated by FXCM Group and its affiliates will be distributed to Global Brokerage Holdings and, consequently, Global Brokerage.
The company also terminated its 2016 Bonus Incentive Plan on the 6th of November 2017.
FXCM Group Profit Allocation
Under the terms of the restructuring, FXCM Group will pay 100 percent of its profits to Leucadia until the amounts due under the credit agreement are fully repaid. The next $350 million will be equally split between Leucadia and Global Brokerage Holdings. From the next $600 million, 90 percent will be attributed to Leucadia, and 10 percent to Global Brokerage.
All aggregate amounts thereafter will be distributed proportionally with 60 percent going to Leucadia and 40 percent to Global Brokerage Holdings.
According to the announcement, the bankruptcy proceeding is not expected to last longer than 60 days.
On the 6th of November this year, Global Brokerage was notified that Nasdaq would remove the company from the NASDAQ Global Market. The exchange approved Global Brokerage to transfer its stock on to the NASDAQ Capital Market exchange. While its securities will begin trading from next Monday, by the end of the year, Global Brokerage will initiate a deregistering procedure to save costs.
Global Brokerage Board and Management Changes
Cost optimisation efforts are touching on the senior executives serving on the board of Global Brokerage, but won’t affect their roles at FXCM Group. David Sakhai and Eduard Yusupov are resigning from their seats on the board of Global Brokerage.
Chief Accounting Officer, Margaret Deverell, Chief Financial Officer, Robert Lande, and General Counsel David S. Sassoon are also submitting their resignations to the board.
According to the announcement made by Global Brokerage, the actions ofthe aforementioned executives will allow them to focus on their roles at FXCM Group.