Leucadia inyecta 300 millones de dolares a FXCM

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leucadiaLeucadia to provide $300M in financing to FXCM

Retail foreign exchange broker FXCM got a $300 million bailout on Friday after taking huge losses on the Swiss National Bank’s (SNB) shock decision to drop its three-year-old peg of 1.20 Swiss francs per euro.

Leucadia National invested $300 million cash in FXCM in exchange for a $300 million senior secured term loan with a two-year term and a 10 percent coupon. If FXCM is sold Leucadia will get a portion of the proceeds. (The terms of the final announcement differed somewhat from a draft obtained earlier in the day).

FXCM shares plunged more than 70 percent in afterhours trading Friday. The stock was halted for the entirety of the regular session.

“Leucadia’s support and this financing are by far the best alternative for FXCM, our customers, our shareholders, and all other relevant constituencies,” FXCM CEO Drew Niv said in a statement.

FXCM warned Thursday evening that clients owed it $225 million and that it may be in breach of some capital requirements. The stock fell 90 percent in premarket trading Friday before being halted.
As recently as last January, the European Central Bank ranked FXCM as the world’s third-largest retail foreign exchange broker.
The rescue came just hours after foreign exchange broker Alpari UK entered insolvency following the Swiss National Bank’s decision.

Citigroup has also lost $150 million to $200 million on forex trading because of the Swiss moves, a source told CNBC, demonstrating the magnitude of impacts on the markets.

Rich Repetto, Sandler O’Neill principal, told CNBC’s “Squawk on the Street” Friday that this “may be the event of the year when you talk about market movements.”

Repetto also said that leverage numbers need to be reexamined by regulators to help prevent these types of reactions in the future.

ABOUT THE AUTHOR: Fernando Valverde Cortes

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