Some interesting disclosures in the just-filed annual report “10-K” form from investment company Leucadia National Corp (NYSE:LUK) have shed some more light on Leucadia’s loan to Retail FX broker FXCM. Leucadia made a $300 million emergency rescue loan to FXCM in January 2015, after FXCM took heavy losses in the hundreds of millions of dollars from a surprise spike in the value of the Swiss Franc.
While the loan has been universally referred to as a $300 million loan – with Leucadia recently disclosing that it had already received payments back from FXCM (principal, interest and fees) of $353 million – Leucadia’s 10-K disclosure states that the loan was “really” just $279 million, and that it had so far received back $331.6 million (through December 31, 2017). The same cash profit margin, but different total and paid-up figures.
So why the discrepancy?
Well in reality, FXCM never actually got the full $300 million. As we explained back when the loan was first made, immediately after “receiving” the $300 million FXCM paid back a $21 million “advisory” fee to Leucadia’s 100%-owned investment banking subsidiary Jefferies LLC. Not bad for one weekend of work.
So, it seems as though Leucadia’s accountants and/or auditors have asked the company to describe the loan as it was really delivered.
FXCM, of course, still needs to pay back the full $300 million, of which now three years on it still owes $70 million, carrying interest of 20.5%. And, Leucadia holds a 50% equity interest in FXCM from the restructuring of the original deal, which when combined with other cash flows it is owed brings its true interest in FXCM closer to the 75% range. Reflecting that reality, FXCM recently decided to rebrand and incorporate the Leucadia name in its logo.