KCG makes another installment on its first lien credit facility, this time $85 million, taking the balance down to just $50 million
KCG (NYSE:KCG) has today publicly stated that it has made a further $85 million installment toward the repayment of its first lien credit facility which was incurred subsequent to the takeover of the firm by GETCO.
This particular payment represents an additional capital repayment to the previous sum of $100 million which the company paid back in January this year.
As it stands, the company has returned a total of $485 million in principal repayments on the $535 million loan entered into on July 1, 2013, leaving a remaining outstanding balance of $50 million. Principal prepayments in excess of the $235 million amortization payment due July 1, 2014 will be applied to reduce the remaining scheduled amortization payments of $7.5 million each quarter beginning September 30, 2014 on a pro rata basis.
The $85 million which was utilized to make this most recent capital repayment was sourced from dividends received from KCG’s strategic investments in BATS and Direct Edge as well as internally generated excess liquidity. As a result of an aggregate $185 million in principal repayments during the first quarter of 2014, KCG will record a writeoff of $7.6 million in capitalized debt costs for the reporting period assuming no further repayments in March.
In its new guise following its acquisition by GETCO, KCG has made a credible effort to restore its solvency, with positive effect, not only in terms of its clearing of the vast majority of capital repayments on its loan, but also achieving achieved steady performance during the twilight months of last year, and with 2014 having commenced very well which was partly assisted by the company’s FX ECN, Hotspot FX having averaged $34.1 billion per day in January.
Prior to Knight Capital having been acquired by GETCO to form KCG, the company had experienced a heart-stopping incident during which a test algorithm was connected to a production server, resulting in erroneous orders being sent to the market at 9.30am on August 1, 2012 after the markets had opened for the day, resulting in a loss of $440 million, placing the previously very strong company on bankruptcy watch.
This particular event was so alarming, that it inspired a book by Peruvian author Edgar Perez, which gives a detailed account of the event.
Undeterred by this, the firm accepted the acquisition proposal from GETCO as opposed to other interested party, Virtu Financial, and has demonstrated that the road to recovery in this case, is indeed a short one.