Leucadia Says It Tripled Money on $300 Million FXCM BailoutZeke Faux
Leucadia National Corp. said it may triple its money on the bailout of online currency-trading firm FXCM Inc.
The $300 million rescue loan and associated rights are now valued at $947 million, New York-based Leucadia said Friday in a regulatory filing. Jefferies Group LLC, Leucadia’s investment bank, also charged FXCM a $21 million fee for putting the deal together, Leucadia said in a separate filing.
FXCM, the largest U.S. retail foreign-exchange broker, almost failed in January after the Swiss central bank decided to let the franc trade freely against the euro. The loan from Leucadia, headed by long-time Jefferies banker Rich Handler, saved the firm from violating capital requirements.
“Our investment stabilized FXCM’s financial position, and has allowed management to focus on repaying our loan and reinvigorating growth in FXCM’s business,” Handler and President Brian Friedman said in a statement as it released first-quarter financial results. “We are impressed with the quality and strength of FXCM’s management, and are optimistic regarding FXCM’s long-term prospects.
The loan is worth so much because it also gives Leucadia the right to force a sale of FXCM and keep most of the money for itself. Since Leucadia has not done that, it had to estimate the market value of its investment.
Leucadia said it determined the value ‘‘with the assistance of a nationally recognized third-party independent valuation firm,” without naming the company.
A 30-cent drop in FXCM’s stock would lead to a $51 million markdown on the value of the investment, Leucadia said. After climbing 33 cents to close at $2.15 Friday, FXCM fell 9.3 percent to $1.95 in extended trading after reporting a $393.3 million net loss from continuing operations in the first quarter.
At Leucadia, first-quarter net income quadrupled to $374.4 million, or 99 cents a share, as net revenue climbed 8.2 percent to $3.18 billion, including the unrealized returns on its FXCM investment.
Jefferies is rebounding from a first-quarter revenue slump, Handler and Friedman said. “The slowness experienced in Jefferies first quarter appears to be passing, as results have strengthened across the board,” they said in the statement.
Jefferies said in March that fixed-income revenue dropped 56 percent to $126 million in the first quarter amid fewer high-yield bond offerings.
Leucadia shares climbed 2 percent to $24, boosting its return for the year to 7 percent.
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