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FXCM (NYSE:FXCM) started dividing the spoils from the new credit agreement with Leucadia National Corporation (NYSE:LUK) among the broker’s senior management. According to the report FXCM filed with the US Securities and Exchange Commission (SEC), the targets determining the bonuses will be lower, while the bonuses themselves could be higher and reach up to 200% of each executive’s base salary for 2016.
The Compensation Committee of the Board of Directors of FXCM has decided to eliminate the Leucadia loan metric, which previously accounted for 25% of the target bonus and increase the 2016 EBITDA portion of the 2016 annual bonus to account for 50% of the target bonus (previously it accounted for 25% of the target bonus). Furthermore, the committee decided to lower by one half the 2016 EBITDA target from at least $80.5 million to at least $40 million.
According to the publication, the annual bonus for 2016 will be calculated as follows: 50% of the target will be earned if the participant achieves the individual objectives and goals set for the participant, and 50% of the target (the “2016 EBITDA Portion”) will be earned if the company achieves an adjusted EBITDA target of at least $40 million. If the EBITDA target achieved is below 75%, the EBITDA portion of the bonus will not be paid out. If the EBITDA is between 75 and 87.5% of the target, will be paid 50% of the bonus. If the target is above 87.5%, but less than 100%, will be paid out 75% of the bonus. If the target is met 100% or above, the EBITDA bonus will be paid in full.
The amended bonus plan will also apply for certain additional employees who are not Named Executive Officers of FXCM.
The new committee decision comes roughly a month after FXCM and Leucadia announced the extension of the existing credit agreement between them by one year to January 2018 and the introduction of a new bonus system for the broker’s senior management.
The announcement did not sit well with FXCM’s shareholders, who saw their profits melting away and caused a 22.5% plunge of the broker’s stock on the following day.
Back in January 2015 Leucadia provided $300 million loan with two-year maturity to FXCM in order to allow the US headquartered broker to meet its regulatory-capital requirements and continue normal operations after the unprecedented loss of $225 million due to Swiss National Bank decision to abandon EUR/CHF minimum exchange rate.
The loan is with 10% interest rate that rises 1.5 percentage points each quarter, but not exceeding 17%. FXCM, however, expressed confidence it would be able to repay it as early as 2016.
Meanwhile, the broker reported that its Q1 2016 retail customer trading volume dropped 3% to $931 billion, compared to the last quarter of 2015.