Leucadia estimates principal balance outstanding on its loan to FXCM at $122.1m
Leucadia still has $122.1 million of principal balance outstanding on its loan to FXCM earning a coupon of 20.5%, the maximum allowed under the credit agreement.
Leucadia National Corp. (NYSE:LUK) has just published a press release on its financial results for the second quarter of 2017, with our attention focused on any mention of the loan extended to FXCM back in January 2015.
In its earnings report, Leucadia said it had nearly recovered the full amount of cash it invested in FXCM in 2015 and that it still has $122.1 million of principal balance outstanding on the loan earning a coupon of 20.5%, the maximum allowed under the credit agreement.
Leucadia also mentions that in May this year, FXCM agreed to sell its non-core interest in FastMatch to Euronext for approximately $55.6 million, with a portion held in escrow and subject to certain future adjustments including a share of a $10 million earn-out if certain performance targets of FastMatch are met. All of the proceeds from this sale will be used to pay down the Leucadia loan, while the remaining balance is set to be paid from additional non-core asset sales and operating cash flow.
The statement that Leucadia makes about FXCM in the report is rather optimistic. It says that “FXCM has restructured and stabilized its business following its exit from U.S. operations in February.”
And yet, we have to stress that Global Brokerage Inc (NASDAQ:GLBR), formerly known as FXCM Inc, was much less optimistic in its most recent 10-K report. In that report, the broker warned that if Leucadia accelerates the repayment of borrowings, the broker may not have sufficient assets to repay its debt or it would have a material adverse effect on its business, operations, financial condition and liquidity.
“The Convertible Notes mature on June 15, 2018. At that time, we will be obligated to repay the aggregate principal amount of the Convertible Notes. We may not have enough available cash or be able to obtain financing at that time to meet our repayment obligations”, Global Brokerage has warned.
Furthermore, the price of Global Brokerage’s shares is still low, raising the possibility of eventual delisting of the company from NASDAQ and an eventual default.