Leucadia and FXCM Sign Memorandum of Understanding to Deepen and Extend Partnership
March 10 2016 - 04:15PM
Leucadia National Corporation (NYSE:LUK) (“Leucadia”) and
FXCM Inc. (NYSE:FXCM) (“FXCM”) today announced that they have
entered into a memorandum of understanding (the “MOU”) to amend the
terms of their Amended and Restated Credit Agreement (the “Credit
Agreement”), and their Amended and Restated Letter Agreement (the
“Letter Agreement”), each dated January 24, 2015. The
nonbinding MOU remains subject to the execution of definitive
agreements and Board and regulatory approvals. Leucadia and
FXCM expect to complete the amendment by June 2016.
Principal Changes to the Credit Agreement:
- The Credit Agreement would be extended by one year to January
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 would 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.
Principal Changes to the Letter Agreement:
- The Letter Agreement would be terminated and its terms shifted
to Newco’s LLC agreement.
- The existing FXCM Newco, LLC (“Newco”) agreement would be
amended, Newco would be renamed FXCM Group LLC (“FXCM Group”), and
Leucadia would own a 49.9% common membership interest in FXCM
Group. FXCM Holdings LLC would own a 50.1% common membership
interest in FXCM Group.
- FXCM 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 would 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:
|
|
|
|
|
|
|
Old Waterfall |
|
Revised 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 |
|
Rich Handler, Chief Executive Officer, and Brian Friedman,
President of Leucadia, stated: “We are pleased to amend our
agreements with FXCM, and affirm our long-term commitment to FXCM
and our confidence in FXCM’s future in the retail FX market. We
believe that our anticipated deal will be beneficial to both
companies and solidify Leucadia’s role as a long-term
partner. The FXCM management team has been essential to
building the company into the industry-leading FX brokerage that it
is today, we fully support them, and feel that retaining them is
vital to FXCM’s future success. We are optimistic about what we can
achieve together moving forward.
Drew Niv, Chief Executive Officer of FXCM, stated: “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.”
Additional Changes to be Anticipated:
- FXCM Inc. will change its name and NYSE ticker symbol, to be
determined at a later date
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, therefore may not be suitable for all
investors. Read full disclaimer.
Visit www.fxcm.com and follow us on
Twitter @FXCM, Facebook FXCM, Google+ FXCM or
YouTube FXCM.
About Leucadia:
Leucadia National Corporation (NYSE:LUK) 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.
Contact:
FXCM
Jaclyn Klein
1-646-432-2463
jklein@fxcm.com
investorrelations@fxcm.com
Leucadia National Corporation
Laura Ulbrandt
1-212-460-1977
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