Leucadia got back most of cash investment in FXCM, marks down $130 mln to adjust value

Leucadia got back most of cash investment in FXCM, marks down $130 mln to adjust value

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Leucadia National Corporation (NYSE: LUK), which loaned the US forex broker FXCM $300 million in January 2015, reported that it has nearly recovered the full amount of cash it invested in the broker.

However, the corporation said in its Q1 2017 earnings release that it has made a non-cash markdown of $130 million to adjust the value of its FXCM equity investment to fair value and has reduced its cumulative gains to about $300 million.

There are still outstanding repayments on a principal balance of $123 million from FXCM and a remaining equity investment value of $187 million.

In the past several months Global Brokerage Inc. (NASDAQ:GLBR), formerly known as FXCM Inc. has been steadily repaying its loan to Leucadia, announcing in the end of February that it still owed the corporation $155 million.

The brokerage, which was forced to shut down its US business after serious regulatory violations resulting in stiff fines and revocation of licenses, sold its US accounts to its main rival Gain Capital and said it would use the money to repay Leucadia. Another source of money was the sale of FXCM’s popular financial analysis site DailyFX to IG for $40 million last autumn.

Leucadia has lent FXCM $300 million in January 2015. The sum was needed by FXCM 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 had an initial interest rate of 10% per annum, increasing by 1.5% per annum each quarter, not to exceed 20.5% per annum. Additionally, Leucadia got a 49.9% stake in FXCM Group, with the rest in in the hands of Global Brokerage Inc.

In 2016 the conditions of the loan were amended and Leucadia extended the agreement by one year, to January 2018.

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