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Leading US forex broker Forex Capital Markets, or FXCM, said on Thursday it has signed with lender Leucadia National Corporation a definitive agreement to amend the conditions of their credit letter agreements. The lender is now holding a membership interest in holding company FXCM Group.
In March, the broker released the changes om its agreements with the lender, but now they have signed. In early 2015, the broker drew a $300 million cash credit from Leucadia to resume operations after it was heavily affected by the market crisis caused by the EUR/CHF unpeg.
Under the signed agreements, the credit’s maturity has been extended by a year to 16 January, 2018. Until the credit is fully repaid, all FXCM distributions and sales proceeds will be used for the repayment of the principal and interest. In addition, FXCM will have the right to defer any three of the remaining interest payments by paying interest in kind, which will permit it to maintaining flexibility to invest and grow its core business.
“We are pleased to affirm our long-term commitment and investment in FXCM and are excited about our prospects for success. We look forward to our role as board members of FXCM Group, LLC, and we believe that, together, Leucadia and FXCM can further strengthen and expand the FXCM platform,” Rich Handler, CEO, and Brian Friedman, President of Leucadia, said as cited in the statement.
In addition to the above-said changes, the letter agreement between the two parties was terminated effective 1 September, 2016. The existing FXCM Newco agreement has been replaced by the LLC Agreement, and Newco has been renamed FXCM Group LLC, in which Leucadia owns a 49.9% membership interest and FXCM Holdings LLC owns the remaining 50.1%.
The following changes have also been included in the signed agreements:
- The LLC Agreement provides that FXCM Group will be governed by an eight-member board of directors, comprising three directors appointed by Leucadia, who will be Rich Handler, Brian Friedman and Jimmy Hallac, three directors appointed by FXCM, who will be Drew Niv, William Ahdout and David Sakhai, and two independent directors, one each to be nominated by Leucadia and FXCM within the next 90 days.
- Subject to certain exceptions, no FXCM Group distributions are permitted under the LLC Agreement until the principal and interest due under the Credit Agreement are repaid.
- Reflecting the new partnership, FXCM will share Leucadia’s right to request a sale process after January 16, 2018, subject to both Leucadia and FXCM reasonably accepting the highest reasonable sales price.
- Concurrently with the execution of the LLC Agreement, FXCM Group and FXCM Holdings, LLC entered into a Management Agreement pursuant to which FXCM Holdings, LLC will manage the assets and day-to-day operations of FXCM Group and its subsidiaries.
- Simultaneously with the execution of the LLC Agreement, FXCM Group adopted the 2016 Incentive Bonus Plan for Founders and Executives, a long-term incentive program with a five-year vesting period, in order to retain and incentivize FXCM senior management to maximize cash flow generation and the growth of the business. Distributions under the incentive program will be made only after Leucadia’s principal and interest under the Credit Agreement are repaid and will equal the following:
- 10% of all distributions from FXCM Group up to $350 million;
- 12% of all distributions from FXCM Group from $350 million to $850 million; and
- 14% of all distributions from FXCM Group above $850 million.
- Leucadia will be entitled to receive additional distributions of proceeds that, when added to its 49.9% membership interest, result in the following distribution percentages:
Amounts due under Credit Agreement
Next $350 million
50% Leucadia / 50% FXCM
45% Leucadia / 45% FXCM / 10.0% FXCM Management
Next $500 million
90% Leucadia / 10% FXCM
79.2% Leucadia / 8.8% FXCM / 12.0% FXCM Management
All aggregate amounts thereafter
60% Leucadia / 40% FXCM
51.6% Leucadia / 34.4% FXCM / 14.0% FXCM Management