I’m reading this from FXCM’s site (FXCM Provides Further Details on Financing With Leucadia National Corporation (NYSE:FXCM)). If I’m reading this correctly, the paragraphs above and below the table in the middle of the article state that even after they pay the 300M loan, they are still in debt for nearly a billion dollars. And after that billion is paid, over half of the company belongs to LUK. In addition, after 3 years, they can sell FXCM if they want to. Given those terms, I really don’t feel safe with my money with FXCM. It’s a shame because they’re the best forex broker I’ve used and they just upgraded their software. Comments Jason?
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That in itself is an asset that will keep either FXCM going or will be put into the hands of someone who can keep going. So give FXCM enough cash to execute the trades you want to put on with them, but diversify your portfolio of dealers by opening accounts with as many as you can. After that, make sure to roll a fatty and have some quality brew on hand for meditation.
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We anticipate that with the proceeds from the sale of some non-core assets and continued earnings we can meet both near and long-term obligations of our financing, while preserving the strength of our franchise. It’s widely known and understood that FXCM’s core business has always been retail FX; It is the majority of FXCM’s revenue.
However, over the past few years, the company has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. We are now looking to sell some of those non-core assets; But, we are not in a rush and are looking to get the highest valuations for these assets.
We are considering closing or selling smaller regulated entities that require large sums of capital requirements, but that offer increasingly low return on capital. The latter move allows us to free up significant amounts of cash that is currently trapped. We believe that in the near term we can pay down a majority of the loan. That’s our goal.
The agreement says we need to pay back $50 million of the loan along with $10 million in fees in 90 days. If we don’t pay that $60 million, we will be assessed an additional $30 million in fees when the loan is due in 2017. So we are going to pay our $60 million and hopefully more in 90 days and then go from there. To be clear, the financing does not force us to do anything at 90 days. FXCM has been independent for over 15 years and we intend to stay that way.
I’ll stress it here again, FXCM is not insolvent, has not filed for any form of bankruptcy, and is in compliance with all regulatory capital requirements in the jurisdictions in which it operates. The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business. With Leucadia, our pockets are even deeper and we aren’t going anywhere.
Additionally, all of our regulated entities except the U.S. provide clients with segregated funds. All of our global client base in our regulated entities minus US clients would be protected under a bankruptcy. Our UK regulated entity through the FSCS even offers clients £50,000 per person in protection. Canada has similar insurance for retail traders of up to $1 million CAD.
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While what you said is true, you didn’t address my concerns. Can you paraphrase this:
Does this mean Leucadia owns 60% of FXCM even after the loan is paid?
Can Leucadia call for a sale of FXCM in 3 years even after the loan is paid?
Hi Kashix,
Since we’re a publicly-traded company (ticker: FXCM), any questions regarding our financials including loan information can only be answered by our Investor Relations department: ir.fxcm.com/contactus.cfm
That said, here are comments from a recent Q&A with our CEO Drew Niv:
[I]Will you be selling FXCM?[/I]
I absolutely do not plan on selling FXCM. Like I said we will be selling non-core assets but no I don’t plan on selling FXCM. That is also why we implemented the shareholder rights plan to prevent a hostile takeover. FXCM has been independent for over 15 years and we intend to stay that way.
You can view the whole Q&A here: Exclusive: FXCM Inc. CEO Drew Niv Discusses Future of the Firm and Retail Forex
[quote=][B]In addition, FXCM, Holdings and Newco have agreed that beginning in three years and thereafter, upon the request of Leucadia or its assignees, they will cause the sale of Newco at the highest reasonably available price. Upon the occurrence of such event, Newco will pay Leucadia and its assignees in accordance with the methodology described above.
Read more: 301 Moved Permanently
I believe it’s in FXCM’s best interest to disclose more information on whatever this means in quotes. 3 years from now, your account balance might just be wiped like the Swiss disaster.
Hi Kashix,
I’m not sure I understand what you mean by that. Do you believe that Leucadia will try to steal client funds?
As our CEO mentioned, FXCM has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. Our goal is to repay the loan by selling those non-core assets. We have no intention of selling FXCM, and plan to remain independant as we have been for the past 15 years.
I’m saying if Leucadia can sell FXCM in 3 years and keep the majority of the sale proceeds, then clients would be uneasy not knowing if their money is safe in the event of a sale. Basically, I read a press release from FXCM and I couldn’t understand it fully so I’m trying to get some clarification. The quoted section in the 4th post is what I’m having trouble understanding.
To clarify, the collateral for the Leucadia loan is ownership of FXCM’s operations, not the money in client accounts. As I mentioned previously, our plan is to repay the loan with proceeds from the sale of non-core assets. However, if for any reason, we were unable to repay the loan on schedule, Leucadia would own the stock of the company and could sell it. That still would not let them take client funds.
If client accounts were at risk from the loan, then regulators would never have allowed that money to be counted as capital for the firm. It’s worth noting that FXCM is in compliance with all regulatory capital requirements in the jurisdictions in which we operate. The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business.
Just as a follow up to my earlier post, here’s an article in today’s Wall Street Journal where Leucadia confirms that they have begun to receive payments from us and expect to recover more than a quarter of their investment within three months of the deal’s closing: Leucadia Begins Recovering FXCM Investment - WSJ
As mentioned previously, FXCM has spent over $250 million dollars in the past few years making strategic acquisitions building up our non-core businesses, mainly on the institutional side. Our goal is to repay the Leucadia loan by selling those non-core assets.
I can now provide more details on this. Below is a slide from the March 13 public presentation for our Q4 2014 financials and February 2015 operating metrics.
A few weeks ago I mentioned our goal is to repay the Leucadia loan by selling certain non-core assets, and today we have announced the first:
[B]FXCM to Sell FXCM Japan to Rakuten Sec for $62 Million[/B]
NEW YORK, March 25, 2015 (GLOBE NEWSWIRE) – FXCM Inc. (NYSE:FXCM) a leading online provider of foreign exchange (FX) trading and related services, today announced that FXCM Holdings, LLC and FXCM Newco, LLC (“FXCM”) have signed a definitive agreement to sell FXCM Japan Securities Co., Ltd (“FXCM Japan”) to Rakuten Securities, Inc. (“Rakuten Sec”), a top 5 FX broker in Japan, and a subsidiary of Rakuten, Inc. (“Rakuten”) (TOKYO:4755), one of the world’s largest Internet services companies, for a purchase price of approximately $62 million.
Read full press release: FXCM to Sell FXCM Japan to Rakuten Sec for $62 Million (NYSE:FXCM)
Thanks for the info
It’s my pleasure, Stoddy
Just today we announced another related update:
FXCM Pays Additional $54 Million Owed to Leucadia
Avoids Contingent Financing Fee of $30 Million
NEW YORK, April 2, 2015 (GLOBE NEWSWIRE) – FXCM Inc. (NYSE:FXCM) a leading online provider of foreign exchange (FX) trading and related services, today announced that it has repaid an additional $54 million outstanding under its credit agreement with Leucadia. The payment was funded in part with proceeds from the sale of FXCM Japan. FXCM has now repaid $66 million under the credit agreement, and as of April 1, 2015, FXCM’s outstanding Leucadia loan balance is $244 million.
By repaying more than $60 million before April 16, 2015, FXCM has avoided a contingent financing fee of $30 million, and FXCM shareholders stand to benefit from an improved sharing determination of proceeds from future asset sales, dividends and distributions pursuant to the terms of the credit agreement.
“FXCM is pleased with how our debt reduction plan is proceeding,” said Drew Niv, CEO of FXCM. “We are ahead of plan and the results of the FXCM Japan sale exceeded our expectations. With all the increased attention to our other properties, we are expecting robust and competitive auctions for the other non-core assets we have targeted to sell.”
Read full press release: FXCM Pays Additional $54 Million Owed to Leucadia (NYSE:FXCM)
so how are the US clients protected? I was considering funding my account (in the US) but after reading this I am not
Hi Contrails,
US regulations prohibit anyone but US brokers from offering forex trading to US residents. However, unlike regulations in the UK and Canada, the regulations in the US do not give forex accounts segregated status. That means if your US broker went bankrupt, you would not have secured creditor status in bankruptcy proceedings. Furthermore, there is no insurance protecting forex accounts in the US similar to the FSCS in the UK or CIPF in Canada. All of that means it’s even more important for traders in the US to know their broker’s financials.
Since we are a publicly-traded company (NYSE ticker: FXCM) the details of our finances including the loan from Leucadia are well known. In fact, in our most recent quarterly earnings presentation, we clearly outlined how we plan to repay this debt. By contrast, most other forex brokers are privately-held companies, so it’s hard to know how much debt they have on their books or the state of their finances.
Despite the events of January 15th that resulted from the Swiss Franc movements, FXCM today remains in a strong competitive position:
[ul]
[li]$303 million in consolidated operating cash
[/li][li]$1.0 billion in customer equity
[/li][li]195,000 active retail FX accounts
[/li][li]Global regulatory capital of $252 million versus $93 million minimum requirements (an excess of $159 million)
[/li][/ul]
Over the past few years, FXCM has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. We are now looking to sell some of those non-core assets; But, we are not in a rush and are looking to get the highest valuations for these assets. We are considering closing or selling smaller regulated entities that require large sums of capital requirements, but that offer increasingly low return on capital.
The first of these businesses, FXCM Japan, was sold on April 1, 2015 for $62.0 million. The latter move allows us to free up significant amounts of cash that is currently trapped. We believe that in the near term we can pay down a majority of the loan. That’s our goal. We have now repaid $66 million under the credit agreement, and as of April 1, 2015, the outstanding Leucadia loan balance is $244 million.
As discussed in the last earnings call on May 8, FXCM is pleased with how our debt reduction plan is proceeding. We are ahead of plan and the results of the FXCM Japan sale exceeded our expectations. With all the increased attention to our other properties, we are expecting robust and competitive auctions for the other non-core assets we have targeted to sell.
I can guarantee you that they will be here at leat 5 years from yout original post, and Yes I am a stock holder grabbed em for a song at 1.50!! : )
You bought it for 1.50$/share? Now it’s 0.91$/share?
Welcome to the forum, v1439
The stock price is a reflection of shareholder value as a result of the loan FXCM received from Leucadia in January. As our CEO Drew Niv mentioned during last week’s earnings call, our plan is to pay back that loan by the end of the year, and we have outlined certain asset sales to accomplish this:
Also, it’s important to note that despite the events of January 15th, our capitalization remains at levels similar to before the SNB event.
While I’m not authorized to comment on our stock price beyond that, you’re welcome to contact our Investor Relations department with any related questions.
That is strange I didn’t have such problems with them.