UPDATE: FXCM Lives to Trade Another Day

PUBLISHED: Jan 16 2015 @ 17:42 | Comments (0) | More info about Lou Gutheil

FXCM (NYSE:FXCM) announced late this afternoon that it had entered into a funding agreement with Leucadia National Corporation (NYSE:LUK) by which the latter would provide $300 million in cash that will bring FXCM into compliance with regulatory financial requirements.

FXCM had become insolvent overnight, losing $225 million following the Swiss National Bank’s decision to un-peg the franc to the euro. The move by the SNG has had worldwide impact, including the closing of several forex firms. Among others suffering major blows were Deutsche Bank AG and Citigroup, Inc., with losses of about $150 million each. Barclays also suffered some financial pain, but the bank reported that it was less than $100 milion.

The Leucadia funding will be supplied through its subsidiary, Jeffries Group LLC, and will be in the form of a senior, secured term loan with an initial coupon of 10% and that will mature in two years.

Trading of FXCM shares was suspended by the NYSE today following its earlier press release that it was in danger of non-compliance and needed to seek financial relief in order to continue operations.

FXCM CEO, Drew Niv, said, “We could not be more grateful to Leucadia and its team for their rapid and effective response and to our regulators, who have been willing to work with us through this challenging process. Leucadia’s support and this financing are by far the best alternative for FXCM, our customers, our shareholders, and all other relevant constituencies.”

After 36 straight hours of negotiations, officials from Leucadia responded saying, “We are pleased to have been able to provide this critical financing to FXCM that is designed to maintain FXCM’s financial strength and allow it to prosper going forward. We believe this is an attractive investment for Leucadia and we look forward to a mutually beneficial relationship with FXCM management. ”

FXCM is the largest online foreign currency trader in the U.S.

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