Jefferies estimates maximum loss exposure due to involvement with FXCM at $212.8 million

Maria Nikolova

The exposure to loss includes the carrying value of the term loan ($73.8 million) and the investment in associated company ($139.0 million), which totaled $212.8 million at September 30, 2018.

There has been little recent change in the evaluation of the exposure to loss of Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, as a result of its involvement with FXCM. The latest numbers in this respect are provided in a 10-Q filing with the United States Securities and Exchange Commission (SEC).

Jefferies explains that its maximum exposure to loss as a result of its involvement with FXCM is limited to the carrying value of the term loan ($73.8 million) and the investment in associated company ($139.0 million), which totaled $212.8 million at September 30, 2018. This marks 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.

At September 30, 2018, Jefferies has a 50% voting interest in FXCM.

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