FXCM shares soar 52% after Leucadia loan restructuring hint

There might indeed be life after Leucadia.

In a stunning reversal of fortune, retail forex broker FXCM Inc (NYSE:FXCM) saw its shares go on a wild rollercoaster ride Monday, mostly in the ‘up’ direction. FXCM shares ended up a whopping 52% for the day to close at $8.08, although at one point in the late afternoon FXCM shares were up 69% at $8.98 before cooling off a bit toward the close at 4pm EST.

The reason for all this action, of course, as exclusively reported earlier in the day at LeapRate was a very big hint FXCM gave to investors that they were hopeful of renegotiating a very restrictive set of loan terms with Leucadia National Corp (NYSE:LUK). The terms of Leucadia’s $300 million January 2015 loan to FXCM gave Leucadia the right to force a sale of FXCM or its assets after three years (i.e. in early 2018), and to get the lion’s share of the proceeds from that eventual sale.

However buying back Leucadia’s ‘rights’ here will not be easy. Nor cheap. There’s no good reason for Leucadia to give up those rights, unless they believe that FXCM management might otherwise walk or that the company was going to pot without heavily incentivized management – or unless there was a valuable and viable alternative.

FXCM Monday Dec 14 trading

FXCM’s wild action Monday. Source: Google Finance.

So how might the loan be restructured?

First off, as we wrote earlier there can be no assurance that the loan terms will actually be restructured. Even if FXCM wants to, Leucadia might not. It takes two to tango.

But assuming that a deal can be done, we’ll bet that it will come in the form of either:

  • Leucadia giving up its rights in return for a direct equity stake in FXCM,
  • a straight up cash payment by FXCM to Leucadia to ‘buy them out’, or
  • a deal could also be a combination of both: cash + equity stake.

Without looking too deep into our crystal ball, we see some more wild volatility ahead in FXCM shares until the company gives definitive word of an agreement with Leucadia, or lack of one. But FXCM certainly has given hope for the first time in a long time to its shareholders that there might be another post-Leucadia chapter to its story after all.

Stay tuned to LeapRate for more exclusive coverage of this developing story.


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