Jefferies estimates maximum loss exposure due to involvement with FXCM at $148.2m

Maria Nikolova

This estimate includes the carrying value of the term loan ($73.2 million) and the investment in associated company ($75 million) at November 30, 2018.

Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, has just posted a SEC filing including information about its performance for the 11 months to end-November 2018.

The Group has already provided some key data in a press release published earlier in January. In today’s 10-K filing with the SEC, however, the Group offers more details on its performance and on its investment in FXCM.

It is probably not necessary to remind FinanceFeeds’ readers about the loan that Leucadia extended to FXCM back in January 2015… 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 eleven months ended November 30, 2018, interest accrued at 20.5% per annum.

During the eleven months ended November 30, 2018, Jefferies received $18.3 million of principal and interest from FXCM and $67.6 million of principal remained outstanding under the term loan as of November 30, 2018. Through November 30, 2018, Jefferies has received cumulatively $349.8 million of principal, interest and fees from its initial $279 million investment in FXCM.

Jefferies has the right, as does Global Brokerage Holdings, the owner of the remaining 50% of FXCM voting interest that is not held by Jefferies, to require a sale of FXCM beginning in January 2018. Distributions to Jefferies under the amended agreements are now: 100% until amounts due under the loan are repaid; 50% of the next $350 million; then 90% of the next $600 million; and 60% of all amounts thereafter.

Jefferies’ maximum exposure to loss as a result of its involvement with FXCM is limited to the carrying value of the term loan ($73.2 million) and the investment in associated company ($75.0 million), which totaled $148.2 million at November 30, 2018. This amount compares to $212.8 million at September 30, 2018.

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