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Will KCG sell more assets and/or businesses, or will it settle debts with cash on hand?
KCG Holdings — the company resulting from the merger of Knight Capital and Getco — formally announced today it had repaid $100 million of its credit facility, mainly using the net proceeds from its $80 million sale of reverse mortgage originator Urban Financial.
KCG also pointed out that its next major debt milestone is a $235 million amortization payment due on its facility in just over half a year, on July 1, 2014. KCG can always opt to refinance the debt and roll it over somehow. However based on its latest actions it seems as though KCG is intent on paying down more of the debt it accumulated from the Getco – Knight Capital merger.
So where will the money come from?
KCG probably has the cash on hand, but in the capital intensive business of market making it is unlikely that KCG will want to part with that amount of cash. An obvious answer is the sale of Forex ECN subsidiary KCG Hotspot (formerly Hotspot FX), which would probably fetch right around that $235 million figure.
With Hotspot’s volume metrics having improved dramatically in 2013 it certainly would be a good time to look at selling Hotspot.
Stay tuned to LeapRate…
The KCG press release on its debt repayment is available here.