The new agreement will give FXCM more time to raise funds to repay its debt by shedding noncore assets.
Retail foreign exchange broker FXCM has just announced a new partnership agreement with Leucadia National Corp., the investment company that bailed out FXCM after the Swiss National Bank event in January 2015. The new agreement between FXCM and Leucadia redrafts the terms of the amended credit agreement and is replacing the restated letter agreement, dating back to the aftermath of the Swiss National Bank (SNB) Crisis.
After it struck a new deal with the currency trading firm, in order to give the business more time to exit some holdings, Leucadia now owns a 49.9% membership interest in FXCM Group, while the New York-based foreign-exchange broker will retain the remaining 50.1% stake in the group.
The new agreement provides that FXCM Group would be governed by an eight-member board, including three members appointed by Leucadia, three directors appointed by FXCM, two independent directors and one each to be nominated by the two firms.
At the expense of FXCM shareholders?
To clarify how the new amendments affect the shareholders in simple points, in case FXCM is sold, the loan to Leucadia will be primarily repaid in full. After that FXCM shareholders will then get 45% of any revenues from the sale up to $350 million, compared with 50% in the old waterfall. For the next $500 million, they will receive a share of 8.8% from any distributions or sales proceeds. This reflects another 1.2 percent loss from the previous suggested distributions plan. Any amounts beyond that, they are entitled to receive 34.4% compared with a previous share of 40%.
After January 2018, each firm would have the right to unwind the partnership, possibly resulting in a sale of FXCM Group. Additional terms include extending the maturity date of the credit agreement by one year to January 16, 2018, potentially giving FXCM more time to raise funds to repay its debt by shedding noncore assets.
While FXCM was actively marketing the non-core assets it has identified to be sold, Leucadia and FXCM concluded that greater value could be realized for all stakeholders through additional time to complete the asset sales.
In addition, Leucadia will get a portion of the proceeds if FXCM or some of its assets are sold. It can also force the sale of FXCM starting in 2018.
Following the announcement, FXCM traded up 1.18 percent to $9.44 while Leucadia lost -0.03 percent to $19.12.
Earlier in the week, shares of FXCM enjoyed a strong run off their two week lows. Some of that move took place on expectations that the agreement with Leucadia would be restructured in a way that would be friendlier to the company's shareholders. However, the change announced today focused on strengthening FXCM management's claim to potential future profits.
Lucrative management incentives
FXCM would retain the right to defer any three of the remaining interest Payments by paying interest in kind. This would help FXCM honor its debt obligations, whilst reiterating maximum flexibility to invest and grow its core business moving forward. However, until the loan and interest under the credit agreement are repaid in full, all distributions and sales proceeds shall continue to be used solely to repay the loan plus interest.
Simultaneously, a long-term incentive program with a five-year vesting period would be put in place for FXCM senior management. This will help maximize cash flow generation and the growth of the business that would operate only after Leucadia’s principal and interest under the credit agreement is repaid and would equal the following:
10% of all distributions from FXCM Group up to $350 million;
12% of all distributions from FXCM Group from $350 million to $850 million; and
14% of all distributions from FXCM Group above $850 million.
Rich Handler, Chief Executive Officer, and Brian Friedman, President of Leucadia, stated: "We are pleased to affirm our long-term commitment and investment in FXCM and are excited about our prospects for success. We look forward to our role as board members of FXCM Group, LLC, and we believe that, together, Leucadia and FXCM can further strengthen and expand the FXCM platform."
Drew Niv, Chief Executive Officer of FXCM, stated: "We are delighted that Leucadia has shown its commitment to FXCM by becoming a long-term partner. This partnership can bring many benefits to FXCM shareholders, clients, and employees. Leucadia's financial strength and its skill and expertise — including the deep expertise available at Jefferies — make it the ideal partner to help FXCM to continue to grow our business."
Retail foreign exchange broker FXCM has just announced a new partnership agreement with Leucadia National Corp., the investment company that bailed out FXCM after the Swiss National Bank event in January 2015. The new agreement between FXCM and Leucadia redrafts the terms of the amended credit agreement and is replacing the restated letter agreement, dating back to the aftermath of the Swiss National Bank (SNB) Crisis.
After it struck a new deal with the currency trading firm, in order to give the business more time to exit some holdings, Leucadia now owns a 49.9% membership interest in FXCM Group, while the New York-based foreign-exchange broker will retain the remaining 50.1% stake in the group.
The new agreement provides that FXCM Group would be governed by an eight-member board, including three members appointed by Leucadia, three directors appointed by FXCM, two independent directors and one each to be nominated by the two firms.
At the expense of FXCM shareholders?
To clarify how the new amendments affect the shareholders in simple points, in case FXCM is sold, the loan to Leucadia will be primarily repaid in full. After that FXCM shareholders will then get 45% of any revenues from the sale up to $350 million, compared with 50% in the old waterfall. For the next $500 million, they will receive a share of 8.8% from any distributions or sales proceeds. This reflects another 1.2 percent loss from the previous suggested distributions plan. Any amounts beyond that, they are entitled to receive 34.4% compared with a previous share of 40%.
After January 2018, each firm would have the right to unwind the partnership, possibly resulting in a sale of FXCM Group. Additional terms include extending the maturity date of the credit agreement by one year to January 16, 2018, potentially giving FXCM more time to raise funds to repay its debt by shedding noncore assets.
While FXCM was actively marketing the non-core assets it has identified to be sold, Leucadia and FXCM concluded that greater value could be realized for all stakeholders through additional time to complete the asset sales.
In addition, Leucadia will get a portion of the proceeds if FXCM or some of its assets are sold. It can also force the sale of FXCM starting in 2018.
Following the announcement, FXCM traded up 1.18 percent to $9.44 while Leucadia lost -0.03 percent to $19.12.
Earlier in the week, shares of FXCM enjoyed a strong run off their two week lows. Some of that move took place on expectations that the agreement with Leucadia would be restructured in a way that would be friendlier to the company's shareholders. However, the change announced today focused on strengthening FXCM management's claim to potential future profits.
Lucrative management incentives
FXCM would retain the right to defer any three of the remaining interest Payments by paying interest in kind. This would help FXCM honor its debt obligations, whilst reiterating maximum flexibility to invest and grow its core business moving forward. However, until the loan and interest under the credit agreement are repaid in full, all distributions and sales proceeds shall continue to be used solely to repay the loan plus interest.
Simultaneously, a long-term incentive program with a five-year vesting period would be put in place for FXCM senior management. This will help maximize cash flow generation and the growth of the business that would operate only after Leucadia’s principal and interest under the credit agreement is repaid and would equal the following:
10% of all distributions from FXCM Group up to $350 million;
12% of all distributions from FXCM Group from $350 million to $850 million; and
14% of all distributions from FXCM Group above $850 million.
Rich Handler, Chief Executive Officer, and Brian Friedman, President of Leucadia, stated: "We are pleased to affirm our long-term commitment and investment in FXCM and are excited about our prospects for success. We look forward to our role as board members of FXCM Group, LLC, and we believe that, together, Leucadia and FXCM can further strengthen and expand the FXCM platform."
Drew Niv, Chief Executive Officer of FXCM, stated: "We are delighted that Leucadia has shown its commitment to FXCM by becoming a long-term partner. This partnership can bring many benefits to FXCM shareholders, clients, and employees. Leucadia's financial strength and its skill and expertise — including the deep expertise available at Jefferies — make it the ideal partner to help FXCM to continue to grow our business."
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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