Jefferies continues to hold $68m of principal balance outstanding on loan to FXCM

Maria Nikolova

Jefferies Financial Group, formerly known as Leucadia, has received a cumulative $350 million in principal, interest and fees from its initial $279 million investment in FXCM through end-November 2018.

Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, has posted some key performance metrics for the 11-month period to November 30, 2018.

Jefferies says it has recorded an impairment charge related to the equity component of its 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. Through November 30, 2018, Jefferies has received a cumulative $350 million in principal, interest and fees from our initial $279 million investment in FXCM, and continues to hold $68 million of principal balance outstanding on its loan, earning a coupon of 20.5%, and $75 million of equity value in the underlying business.

More details are set to be available in the annual SEC filing.

Let’s recall that, Jefferies has put its maximum exposure to loss as a result of its involvement with FXCM at $212.8 million at September 30, 2018. This sum is limited to the carrying value of the term loan ($73.8 million) and the investment in associated company ($139.0 million). This marked little change from the $219.9 million loss exposure at June 30, 2018.

In January 2015, Leucadia entered into a credit agreement with FXCM, and provided FXCM a $300 million senior secured term loan due January 2017 (the term of which was subsequently extended to January 2019), with rights to a variable proportion of certain future distributions in connection with an FXCM sale of assets or certain other events, and to require a sale of FXCM beginning in January 2018. The loan had an initial interest rate of 10% per annum, increasing by 1.5% per annum each quarter, not to exceed 20.5% per annum.

During the nine months ended September 30, 2018, interest accrued at 20.5% per annum. During the nine months ended September 30, 2018, Jefferies received $15.4 million of principal and interest from FXCM and $70.6 million of principal remained outstanding under the term loan as of September 30, 2018.

Through September 30, 2018, Jefferies has received cumulatively $347.0 million of principal, interest and fees from its initial $279.0 million investment in FXCM.

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