FXCM and Leucadia Have Entered into MoU, Amending Terms

Leucadia National Corporation and FXCM Inc. has informed today that they have entered into a memorandum of understanding (MoU). This will amend the terms and conditions of the Credit Agreement, as well as Letter Agreement, both dated January 24, 2015. The entire amendment it expected to be finished by June 2016.

One of the major changes in the Credit Agreement is about to be extended by one year to January 2018 for FXCM to better optimize its asset sales. Now the broket is actively promoting the non-core assets, set to be sold. Both parties have agreed that it would be much useful for all stakeholders to provide more time to FXCM to complete the asset sales. Moreover, FXCM is expected have the right to defer any three of the remaining interest payments by paying interest in kind. Payments in kind will permit FXCM to honor its debt obligations, while maintaining maximum flexibility to invest and grow its core business. Until the loan and interest under the Credit Agreement are fully repaid, all distributions and sales proceeds shall continue to be used solely to repay the loan plus interest.
As for the Letter Agreement, the agreement would be terminated and its terms shifted to Newco’s LLC agreement. The existing FXCM Newco, LLC (“Newco”) agreement would be also amended, Newco would be renamed FXCM Group LLC (“Group”), and Leucadia would own a 49.9% common membership interest in the Group. FXCM Holdings LLC would own a 50.1% common membership interest in Group.
The Group would be governed by an eight-member board, comprising three directors appointed by Leucadia, contemplated to be Rich Handler, Brian Friedman and Jimmy Hallac, three directors appointed by FXCM, and two independent directors, one each to be nominated by Leucadia and FXCM. No FXCM Group distributions would be permitted until the principal and interest due under the Credit Agreement is repaid. After January 2018, Leucadia and FXCM would each have the right to begin a process that could unwind the partnership, potentially resulting in a sale process for FXCM Group. A long-term incentive program with a five-year vesting period would be put into place for FXCM senior management to retain and incentivize management to maximize cash flow generation and the growth of the business that would operate only after Leucadia’s principal and interest under the Credit Agreement is repaid and would equal the following:
10% of all distributions or sales proceeds from FXCM Group up to $350 million;
12% of all distributions or sales proceeds from FXCM Group from $350 million to $850 million; and
14% of all distributions or sales proceeds from FXCM Group above $850 million.
Long term incentive program participants shall receive their share of any distributions or sales proceeds while unvested.

Leucadia is expected to own a non-voting preferred class of membership interest that, when added to its 49.9% common membership interest, would result in the following distribution of proceeds from FXCM Group:

Chief Executive Officer of FXCM, Drew Niv, said: “Leucadia as a long-term partner in FXCM will be of great benefit to all FXCM stakeholders, clients, and employees, as well as confirm the health and stability of FXCM to our customers. The extension of the Credit Agreement should also help FXCM realize appropriate values for assets we expect to sell, while also allowing us to continue to grow our core business.”

The official report may be found here.

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