Leading online FX and CFD trading provider, GAIN Capital (GAIN), has announced that it intends to offer a $65 million aggregate principal of its convertible senior notes due 2018 to qualified institutional investors, subject to regulatory approval. The listed firm, headquartered in Bedminster, New Jersey will use the proceeds to repay debt and use the capital for potential acquisitions.
GAIN Capital’s announcement comes a day after arch rival, FXCM, made a press release about changes in its credit facility. Both convertible notes and credit facility are signs of a firm’s intention to either pay debt or raise cash for strategic growth and development. The two US giants have both been involved in acquisitions this year, GAIN purchased GFT and FXCM made a string of purchases with Faros and Infinium Note.
The official press briefing outlines details of the issuance made by GAIN, it states: “The notes will be unsecured, senior obligations of GAIN Capital, and interest will be payable semi-annually. The notes will be convertible at any time prior to the close of business on the business day immediately preceding June 1, 2018 only upon the occurrence of specified events; thereafter, until the close of business on the business day immediately preceding the maturity date of December 1, 2018, the notes will be convertible at any time.”
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Convertible notes (bonds or debt) are issued by firms as they give investors the option to convert the debt into shares. In addition they have numerous advantages for investors including; offering a higher yield than those obtainable on the shares into which the bonds convert. The debt instruments have an element of safety as they provide asset protection, on the upside there are possibilities of high equity-like returns.
Corporate debt is commonly issued by firms in financial markets, in 2009 ETrade issued a $1 billion senior note after suffering on the back of mortgage back securities. Earlier this year in May, FXCM issued debt valued at $125 million.
News of the debt issuance was taken negatively by the market as shares for GAIN opened lower on Thursday and are currently trading down 15% to $9.01.