Leucadia National Corporation (NYSE:LUK) (“Leucadia”) and FXCM
Inc. (NYSE:FXCM) (“FXCM”) today announced that they have
completed the process of deepening their partnership, with Leucadia
now holding a membership interest in FXCM’s operating entity, FXCM
Group, LLC. (See below for a summary of definitive agreements.)
Rich Handler, Chief Executive Officer, and Brian Friedman,
President of Leucadia, stated: "We are pleased to affirm our
long-term commitment and investment in FXCM and are excited about
our prospects for success. We look forward to our role as
board members of FXCM Group, LLC, and we believe that, together,
Leucadia and FXCM can further strengthen and expand the FXCM
platform."
Drew Niv, Chief Executive Officer of FXCM, stated: "We are
delighted that Leucadia has shown its commitment to FXCM by
becoming a long-term partner. This partnership can bring many
benefits to FXCM shareholders, clients, and employees.
Leucadia’s financial strength and its skill and expertise –
including the deep expertise available at Jefferies – make it the
ideal partner to help FXCM to continue to grow our business."
About Leucadia Leucadia National Corporation,
with a $45 billion balance sheet as of June 30, 2016, and ratings
of Baa3 (Moody’s)/BBB- (Standard & Poor’s, Fitch), is a
diversified holding company engaged through its consolidated
subsidiaries in a variety of businesses, including investment
banking and capital markets, beef processing, manufacturing, oil
and gas exploration and production and asset management. The
Company also owns equity interests in businesses that are accounted
for under the equity method of accounting, including a diversified
holding company, real estate, commercial mortgage banking and
servicing, telecommunication services in Italy, automobile
dealerships and development of a gold and silver mining
project. As of year-end 2015, Leucadia, through its
consolidated subsidiaries and unconsolidated investee companies,
employed approximately 35,000 full-time employees.
About JefferiesJefferies, with a $37 billion
balance sheet as of May 31, 2016, and ratings of Baa3
(Moody’s)/BBB- (Standard & Poor’s, Fitch), is the world's only
independent, full-service global investment banking firm focused on
serving clients for over 50 years, and a leader in providing
insight, expertise and execution to investors, companies and
governments. Jefferies provides a full range of investment banking,
sales, trading, research and strategy across the spectrum of
equities, fixed income and foreign exchange, as well as wealth
management, in the Americas, Europe and Asia. Jefferies Group LLC
is a wholly owned subsidiary of Leucadia.
About FXCM Inc.FXCM
Inc. (NYSE:FXCM) is a leading provider of online foreign
exchange (FX) trading, CFD trading, spread betting and related
services. Our mission is to provide global traders with
access to the world’s largest and most liquid market by offering
innovative trading tools, hiring excellent trading educators,
meeting strict financial standards and striving for the best online
trading experience in the market.
Clients have the advantage of mobile trading,
one-click order execution and trading from real-time charts.
In addition, FXCM offers educational courses on FX trading and
provides free news and market research through DailyFX.com.
Trading foreign exchange and CFDs on margin
carries a high level of risk, which may result in losses that could
exceed your deposits, and therefore may not be suitable for all
investors. Read full disclaimer.
This release contains "forward-looking statements" within the
meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements include statements about
future results and performance, including future market share and
expected financial results. It is possible that actual results may
differ materially from the anticipated results indicated in these
forward-looking statements. Please refer to each of Leucadia’s,
Jefferies’ and FXCM’s most recent Annual Reports on Form 10-Ks for
a discussion of important factors that could cause actual results
to differ materially from those projected in these forward-looking
statements.
Summary of Definitive
Agreements
As described below, Leucadia and FXCM signed definitive
agreements to amend the terms of their Amended and Restated Credit
Agreement (the “Credit Agreement”), and to replace their Amended
and Restated Letter Agreement (the “Letter Agreement”), each dated
January 24, 2015, with, among other agreements, an amended Credit
Agreement and a new Limited Liability Company Agreement
Principal Changes to the Credit Agreement
- The maturity date of the Credit Agreement has been extended by
one year to January 16, 2018 to allow FXCM more time to optimize
remaining asset sales. While FXCM is actively marketing the
non-core assets it has identified to be sold, Leucadia and FXCM
concluded that greater value could be realized for all stakeholders
through additional time to complete the asset sales.
- FXCM will have the right to defer any three of the remaining
interest payments by paying interest in kind, which will permit
FXCM to maintaining flexibility to invest and grow its core
business.
- Until the loan under the Credit Agreement is fully repaid, all
distributions and sales proceeds will continue to be used solely to
repay the principal and interest.
Principal Changes to the Letter Agreement and Entry into the LLC
Agreement, Management Incentive Plan and Management Agreement
- The Letter Agreement was terminated effective September 1,
2016, and the material terms of the Letter Agreement are now
reflected in the Amended and Restated Limited Liability Company
Agreement of FXCM Group, LLC (the “LLC Agreement”).
- The existing FXCM Newco, LLC (“Newco”) agreement has been
replaced by the LLC Agreement, and Newco has been renamed FXCM
Group, LLC (“FXCM Group”). Leucadia owns a 49.9% membership
interest in FXCM Group, and FXCM Holdings, LLC owns a 50.1%
membership interest in FXCM Group.
- The LLC Agreement provides that FXCM Group will be governed by
an eight-member board of directors, comprising three directors
appointed by Leucadia, who will be Rich Handler, Brian Friedman and
Jimmy Hallac, three directors appointed by FXCM, who will be Drew
Niv, William Ahdout and David Sakhai, and two independent
directors, one each to be nominated by Leucadia and FXCM within the
next 90 days.
- Subject to certain exceptions, no FXCM Group distributions are
permitted under the LLC Agreement until the principal and interest
due under the Credit Agreement are repaid.
- Reflecting the new partnership, FXCM will share Leucadia’s
right to request a sale process after January 16, 2018, subject to
both Leucadia and FXCM reasonably accepting the highest reasonable
sales price.
- Concurrently with the execution of the LLC Agreement, FXCM
Group and FXCM Holdings, LLC entered into a Management Agreement
pursuant to which FXCM Holdings, LLC will manage the assets and
day-to-day operations of FXCM Group and its subsidiaries.
- Simultaneously with the execution of the LLC Agreement, FXCM
Group adopted the 2016 Incentive Bonus Plan for Founders and
Executives, a long-term incentive program with a five-year vesting
period, in order to retain and incentivize FXCM senior management
to maximize cash flow generation and the growth of the
business. Distributions under the incentive program will be
made only after Leucadia’s principal and interest under the Credit
Agreement are repaid and will equal the following:
- 10% of all distributions from FXCM Group up to $350
million;
- 12% of all distributions from FXCM Group from $350 million to
$850 million; and
- 14% of all distributions from FXCM Group above $850
million.
Long-term incentive program participants will receive their
share of any distributions or sales proceeds while unvested.
In addition, if a participant is terminated from employment other
than for cause or due to a material breach of a restrictive
covenant, he or she will receive either a non-voting membership
interest in FXCM Group that entitles the participant to the same
distributions he or she would have otherwise received under the
incentive program or a lump-sum cash amount, as determined by the
plan administrator in its sole discretion. If a participant
is terminated from employment for cause or due to a material breach
of a restrictive covenant, he or she would not be entitled to
distributions following such termination and will forfeit all
interests under the plan. A termination payment will also be
paid upon any change of control of FXCM Group.
- Leucadia will be entitled to receive additional distributions
of proceeds that, when added to its 49.9% membership interest,
result in the following distribution percentages:
|
|
Old Waterfall |
|
New Waterfall |
Amounts due under Credit
Agreement |
|
100%
Leucadia |
|
100%
Leucadia |
Next $350 million |
|
50%
Leucadia / 50% FXCM |
|
45%
Leucadia / 45% FXCM / 10.0% FXCM Management |
Next $500 million |
|
90%
Leucadia / 10% FXCM |
|
79.2%
Leucadia / 8.8% FXCM / 12.0% FXCM Management |
All aggregate amounts
thereafter |
|
60%
Leucadia / 40% FXCM |
|
51.6%
Leucadia / 34.4% FXCM / 14.0% FXCM Management |
Contacts:
Leucadia: Laura Ulbrandt, 212-460-1977
Jefferies: Richard Khaleel, 212-284-2556
FXCM: Jaclyn Sales, 646-432-2463
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