Global Brokerage expects to file the Chapter 11 bankruptcy case with the United States Bankruptcy Court for the Southern District of New York on or before December 20, 2017.
Further to the press release issued by Global Brokerage Inc (NASDAQ:GLBR), formerly known as FXCM Inc, on November 10, 2017, the company has today submitted a lengthy filing with the United States Securities and Exchange Commission (SEC), detailing the plans to opt for a “reorganizational” bankruptcy under Chapter 11.
FinanceFeeds has provided its readers with an overview of Chapter 11 proceedings in an earlier article. In today’s SEC filing, Global Brokerage offers thorough information on how it plans to proceed.
Global Brokerage commenced a solicitation of votes for the restructuring plan on November 10, 2017, and expects to commence the chapter 11 case on or before December 20, 2017. The case will be filed with the United States Bankruptcy Court for the Southern District of New York.
What is the essence of the plan? Overall, the purpose of the Restructuring Transaction is to extend the maturity of GLBR’s debt obligations, extend the maturity of the Leucadia Credit Agreement, and enhance the likelihood of distributions and payments being made from FXCM to Global Brokerage Holdings and from Global Brokerage Holdings to Global Brokerage Inc and thus to permit GLBR to pay its obligations.
Although Global Brokerage’s shares are set to be traded on NASDAQ Capital Market through the end of calendar year 2017, the failure of the company to remain listed on NASDAQ Global Market is a “Fundamental Change,” under the indenture for the Existing Notes, which will result in each holder of the Existing Notes having the right, at such holder’s option, to require GLBR to purchase for cash all of such holder’s Existing Notes at a purchase price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest. As Global Brokerage does not have sufficient funds to repurchase the Existing Notes should one or more of the holders require repurchase, the failure to satisfy the repurchase obligations constitutes an event of default under the Existing Notes Indenture.
The company is obligated to make a scheduled interest payment to Holders of the Existing Notes on December 15, 2017, subject to a thirty (30) day grace period. Global Brokerage, however, does not have and does not anticipate having sufficient liquidity to make the December 15, 2017 interest payment. The Existing Notes mature by their own terms in June 2018. GLBR does not have sufficient funds and does not anticipate having sufficient funds to repay the Existing Notes at maturity.
Given the delisting notice received from NASDAQ, the impending December 15, 2017 interest payment and the impending June 2018 maturity of the Existing Notes, Global Brokerage has been in negotiations about a potential restructuring of GLBR’s obligations under the Existing Notes. Those negotiations resulted in the execution of the Support Agreement, which established the framework and agreements necessary to proceed with the Plan.
To implement the restructuring, Global Brokerage is soliciting votes from the holders of Existing Notes Claims to accept or reject the Plan. GLBR expects to file a voluntary proceeding under chapter 11 of the Bankruptcy Code, and request that the Bankruptcy Court approve the Plan. If the Bankruptcy Court approves the Plan, GLBR can exit bankruptcy once it satisfies all conditions to the effectiveness of the Plan and can then emerge from bankruptcy with the New Notes having a five-year maturity.
The Ballots must be received by the Voting Agent by 5:00 p.m. (Eastern Prevailing Time) on December 4, 2017 , unless GLBR and the Plan Support Parties extend the date until which Ballots will be accepted.
Global Brokerage expects that the Chapter 11 Case will be of a short duration, and expect to request that the Bankruptcy Court schedule a confirmation hearing within 30 to 45 days of the Petition Date. If no plan of reorganization can be confirmed, the Chapter 11 Case may be converted to a case under chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed to liquidate GLBR’s assets for distribution in accordance with the priorities established by the Bankruptcy Code.
Global Brokerage will cease to be an SEC reporting company post-confirmation but will continue to provide regular financial disclosures to the holders of the New Notes in accordance with the terms of the New Notes Indenture. The company expects to file a 10-K for 2017 in March 2018.
Although the report is quite lengthy, it did not shed much light on certain matters, such as what will happen to the number of lawsuits against Global Brokerage and its (former) top executives. The company does not mention anything as to whether its plan envisages any expenses (or guarantees any payments) related to these cases. It simply restates what was already stated in earlier reports, that is, that it will fight the allegations in these lawsuits.