Jefferies provides update on FXCM loan repayment

Maria Nikolova

Jefferies’ filing with the SEC shows $71.4 million of principal remained outstanding under the term loan as of February 28, 2019.

Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, has posted a filing with the Securities and Exchange Commission (SEC), with the document providing some details on the Group’s financial performance for the quarterly period ended February 28, 2019. FinanceFeeds has already reported on Jefferies’ key financial metrics for the period, but the latest SEC filing provides information on the loan extended to FXCM.

In January 2015, Leucadia entered into a credit agreement with FXCM, and provided FXCM a $300 million senior secured term loan. According to the SEC filing, $71.4 million of principal remained outstanding under the term loan as of February 28, 2019. During the three months ended February 28, 2019, interest accrued at 20.5% per annum. Through February 28, 2019, Jefferies has received cumulatively $349.8 million of principal, interest and fees from its initial $279.0 million investment in FXCM.

Jefferies recorded income related to the term loan in Principal transactions revenues of $0.5 million during the three months ended February 28, 2019 and $8.6 million during the three months ended March 31, 2018.

Jefferies says its maximum exposure to loss as a result of its involvement with FXCM is limited to the carrying value of the term loan ($73.6 million) and the investment in associated company ($72.5 million), which totaled $146.1 million at February 28, 2019. This compares to a maximum loss exposure of $148.2 million at the end of November 2018. Apparently, the difference is not that big.

Jefferies estimates the fair value of its term loan by using a valuation model with inputs including management’s assumptions concerning the amount and timing of expected cash flows, the loan’s implied credit rating and effective yield. Because of these inputs and the degree of judgment involved, the company has categorized thos term loan within Level 3 of the fair value hierarchy.

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