Jefferies Writes Down $62 Million of Investment Value in FXCM

Jefferies generated a cumulative $350 million in principal, interest, and fees from its initial $279 million investment in FXCM.

Jefferies Financial Group Inc. (NYSE: JEF) has reported its latest financials for the fiscal period ending November 30, 2018. Formerly known as Leucadia National Corporation, the parent company of FXCM, the group has seen mixed performance across its revenues and key segments.

Taken as a whole, Jefferies reported net revenues of $3.2 billion in 2018, almost unchanged from a year ago. One of the biggest contributors to this figure was the growth in the investment banking segment, which rose by eight percent in 2018 to a total of $1.9 billion worth of revenues.

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Looking at its net income, Jefferies completely failed to match what had been a record profit in the year prior, registering a figure of $159 million in 2018 compared to $358 million in 2017. But excluding charges related to the tax cuts and jobs act, which amounted $165 million, Jefferies would have reported net earnings of $324 million.

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Details on rescue loan to FXCM

Jefferies’ latest filing with the SEC has also shed some light on the developments around its investment in foreign exchange broker FXCM. The company concluded that due to recent regularly changes introduced by Europe’s regulator ESMA, as well as the broker’s weak results; it has lowered the fair value of its equity interest in FXCM by $62 million.

For its part, the ‎oil-to-beef conglomerate has recovered the full amount of cash it had originally invested into FXCM back in 2015, following the FX industry convulsion triggered by the Swiss National Bank’s sudden move to scrap its cap on the EURCHF exchange rate.

More specifically, the company generated a cumulative $350 million in principal, interest, and fees from its initial $279 million investment in FXCM. Furthermore, Jefferies still maintains $68 million of principal balance outstanding on its loan and $75 million of equity value in the business as of November 30, 2018.

“We also recorded an impairment charge related to the equity component of our investment in FXCM, which is based on updated expectations that have been impacted by the recently revised regulations of the European Securities Market Authority and dampened operating results. FXCM has done a good job streamlining operations and improving its product offerings and remains well positioned to take advantage of rising interest rates and the return of volatility to the FX and equities markets,” it added.

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