Jefferies puts maximum exposure to loss due to involvement with FXCM at $126.6m

Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, has posted its 10-Q filing for the quarter to end-May 2019 with the Securities and Exchange Commission, with the document including some information on Jefferies’ investment in FXCM Group.

Jefferies’ investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2021 ($71.9 million principal outstanding at May 31, 2019), a 50% voting interest in FXCM and a majority of all distributions in respect of the equity of FXCM.

FXCM Group, LLC is considered a VIE and the term loan and equity ownership are variable interests. Jefferies has determined that it is not the primary beneficiary of FXCM because it does not have the power to direct the activities that most significantly impact FXCM’s performance. Therefore, it does not consolidate FXCM and Jefferies accounts for its equity interest under the equity method as an investment in an associated company.

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 ($56.6 million) and the investment in associated company ($70.0 million), which totaled $126.6 million at May 31, 2019.

Net revenues from the FXCM term loan include gains (losses) of $(11.4) million and $6.5 million during the second quarter of 2019 and 2018, respectively.

Net revenues from the FXCM term loan include gains (losses) of $(11.0) million and $15.1 million during the first half of 2019 and 2018, respectively.

Earlier in July, online trading services provider Forex Capital Markets Limited (FXCM UK) has posted a document via UK Companies House stating that Jefferies Financial Group Inc (NYSE:JEF) is a person with significant control for FXCM UK. Jefferies is said to have significant influence or control over the brokerage.