FX brokerage holding company Global Brokerage Inc (OTCMKTS:GLBR), formerly known as FXCM Inc, has announced that it has successfully completed its prepackaged plan of reorganization, and has emerged from Chapter 11 bankruptcy.
The effective date of its prepackaged Chapter 11 Plan of Reorganization of was confirmed by Bankruptcy Judge Michael E. Wiles on January 22, 2018, and formally occurred yesterday, on February 8, 2018.
The company stated that the overall purpose of the Plan was successful, with the company’s new secured notes having been distributed in accordance with the Plan.
Global Brokerage owns a 51% equity stake in Retail FX broker FXCM Group. However given agreements between Global Brokerage, FXCM, and Leucadia National Corp (NYSE:LUK) regarding future distributions of FXCM cash flows, the company stated that its real economic interest in FXCM is between 10-50%, depending again on the amount of distributions made by FXCM Group.
Global Brokerage filed for Chapter 11 bankruptcy protection in November after the company’s shares were delisted from Nasdaq. The delisting triggered an ‘event of default’ in the company’s $172 million of outstanding convertible notes. (And in any event, the notes were due in June 2018, with the company clearly not having the cash to repay them). Under the reorganization plan, the Global Brokerage convertible noteholders agreed to have the notes replaced with a new issue of non-convertible debt which isn’t due for 5 more years (i.e. until 2023), and which carries a higher interest rate (7% vs. 2.25%) than the old convertible notes.
Global Brokerage still faces the challenge of having to pay out $12 million in annual interest payments for the next five year on its ‘new’ debt – a grand total of about $60 million – plus it will have to come up with another $172 million from somewhere in five years’ time to repay the debtholders.