Leucadia announces $130 million markdown on FXCM equity investment

Maria Nikolova

Leucadia says, however, that it has nearly recovered the full amount of cash invested.


Leucadia National Corp. (NYSE:LUK) has posted its financial highlights for the first quarter of 2017, with our attention pinned on any mention of FXCM and the possible impact of the February events on Leucadia’s results.

In its Q1 2017 report, Leucadia mentions FXCM indeed. It says that its gains for the period were offset by a non-cash $130 million markdown to adjust the value of its FXCM equity investment to fair value. This, in its turn, reduces Leucadia’s cumulative gains for the period to about $300 million.

Leucadia’s management added that:

“While we are disappointed to be marking down our equity investment in FXCM, we have nearly recovered the full amount of cash we invested, and look forward to continued repayments on a principal balance of $123 million and owning a remaining equity investment value of $187 million.”

Leucadia had already offered some assessment of the financial impact of FXCM’s exit from the US market following regulatory findings about the broker misleading its customers and authorities for several years. According to Leucadia’s annual report for 2016, its maximum exposure to loss due to FXCM was $500.8 million at December 31, 2016. This reflected a sum of the carrying value of the term loan ($164.5 million) and the investment in associated company ($336.3 million). As of December 31, 2016, Leucadia has a 49.9% membership interest in FXCM and up to 65% of all distributions.

Back then, Leucadia stressed that FXCM’s management may make decisions that are not in Leucadia’s best interest.

Leucadia’s concerns about possible actions by non-US regulators against FXCM, however, seem not to have materialized (yet). There has been no regulatory action against the broker outside of the US in response to the actions of the National Futures Association and the Commodity Futures Trading Commission.

Drew Niv has relinquished his director roles in a number of companies, including Forex Capital Markets Limited (FXCM UK), whereas Forex Capital Markets LLC is no longer an authorized representative of FXCM Australia. This pretty much sums up the obvious consequences for FXCM’s overseas business after the US events from early February this year.

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