Knight Capital’s $375 Million of Convertible Bonds Decline

Knight Capital Group Inc. (KCG)’s bonds declined after the firm said yesterday’s stock trading breakdown will prompt losses of $440 million.

The company’s $375 million of 3.5 percent convertible bonds due in March 2015 fell 8.625 cents to 74.5 cents on the dollar and yielded 15.8 percent as of 2:45 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt traded as low as 40 cents earlier.

Shares of the Jersey City, New Jersey-based firm have plunged 72 percent in the past two days to $2.86 as of 2:57 p.m. in New York after Knight’s computers helped spur sudden price swings of 10 percent or more in dozens of companies. The firm, whose projected loss is almost quadruple its 2011 net income, said today it’s exploring strategic and financial alternatives to strengthen its capital base.

The bonds are convertible to stock at $20.87 a share. Investors who own the note can demand repayment upon a “fundamental change” in the company including a sale for cash or if a person or group discloses a more than 50 percent ownership stake in Knight, according to a February regulatory filing.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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