FXCM continues to market V3 and Lucid Markets for sale, restructuring leads to $8.6m in charges in H1 2017

Maria Nikolova

FXCM continues to target further reduction of the Leucadia debt through non-core asset sales, with Lucid Markets and V3 actively marketed for sale.

Global Brokerage Inc (NASDAQ:GLBR), formerly known as FXCM Inc, has just submitted its filing for the second quarter and the first half of 2017 with the Securities and Exchange Commission (SEC). The document reiterates the concerns of the company regarding its possible delisting from the Nasdaq Global Select Market, states its near-term goals and sheds some light on the progress of its restructuring as a result of the events from February 6, 2017.

  • NASDAQ delisting risk

As per previous reports, Global Brokerage’s publicly held shares must exceed $15 million for ten consecutive business days between May 2, 2017 and October 30, 2017, to avoid delisting.

If that market-value requirement is not satisfied, Nasdaq will provide written notice that Global Brokerage’s common stock is subject to delisting from the Nasdaq Global Select Market. In such a case, Global Brokerage will either appeal such determination to a hearings panel or submit an application to transfer its securities to the Nasdaq Capital Market.

Global Brokerage reiterates that there can be no assurance that it will remain listed on the Nasdaq Global Select Market after October 31, 2017.

The Corporation’s failure to remain listed on the Nasdaq Global Select Market is a Fundamental Change, which allows each holder of the Convertible Notes to require the Corporation to purchase for cash all of such holder’s notes at a purchase price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest. Global Brokerage believes it could be difficult to procure the requisite liquidity should the holders of the Convertible Notes exercise their rights to require the Corporation to purchase their notes.

“The Corporation’s inability to comply with this requirement under the indenture would be an event of default, which also could lead to an event of default under the Leucadia loan agreements”.

  • The Restructuring Plan

The restructuring plan has resulted in a workforce reduction of approximately 170 employees, which account for 22% of the global workforce. The majority of the affected employees completed service through the required notice period in April 2017.

In line with the restructuring plan, FXCM vacated its San Francisco office in May 2017. The broker expects to vacate or sublease certain other leased offices in the US due to the restructuring.

During the three and six months ended June 30, 2017, FXCM incurred total restructuring charges of $0.2 million and $8.6 million, respectively, consisting of severance costs for terminated employees, contract termination costs and facilities costs.

  • Sale of non-core assets and Leucadia loan

FXCM makes a small remark regarding the progress of the sale of its non-core assets. As reported in May this year, FXCM entered into a definitive agreement to sell its equity interest in FastMatch for a purchase price of approximately $55.6 million to Euronext, with a portion held in escrow and subject to certain future adjustments. The aim of this sale is, of course, to repay the loan to Leucadia.

As per Leucadia’s latest report, the principal balance outstanding on its loan to FXCM was $122.1 million.

In its report, released today, FXCM says that thanks to the proceeds from the sale of its US-domiciled customer accounts to Gain Capital and capital freed up after terminating its US registrations, it repaid $36.9 million of principal on the term loan in the first half of 2017. Subsequent to second quarter-end, it repaid an additional $9.1 million, including $4.9 million of capital freed up from terminating its US registrations, $4 million from the second installment received in connection with the sale of DailyFX, and $0.2 million of additional proceeds received from GAIN for the US accounts. The remaining term loan balance is $113.5 million as of the date of this filing.

The remaining non-core assets to be sold include FXCM’s investments in Lucid Markets and V3 Markets. FXCM says it is in active sales processes for these assets but mentions no particular buyers.

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