FXCM Inc (NYSE:FXCM) Gets $300 Million Rescue Package From Jefferies

FXCM Inc (NYSE:FXCM) has eventually found a way to address its capital shortfall triggered by a sudden move by the Swiss National Bank to end currency cap. FXCM is set to receive a $300 million cash injection from the investment bank Jefferies Group. Forex traders suffered massive losses following the removal of currency peg on Franc, a development that threw forex brokerage FXCM into disarray.

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10% initial coupon the rescue package

The $300 million lifeline extended to FXCM Inc (NYSE:FXCM) comes in the form of a senior secured term loan. The loan is repayable in two years and carries an initial interest rate of 10%. The cash boost allows FXCM to carry its operations.

Earlier, FXCM customers suffered huge losses after Swiss central bank put an end to currency peg which wiped out $225 million from its capital base. The retail forex broker warned that it was at risk of breaching regulatory capital requirement. It immediately started looking for alternatives to address the matter while also engaging with regulators to resolve the issue.

Some brokers close shops

The rescue package extended by Jefferies comes as a key boost to FXCM, compared to its peers which were forced out of business after suffering undisclosed losses. In a statement New Zealand based Global Brokers NZ announced that it was closing shops after its clients suffered serious losses following the removal of Franc currency cap.

Last year, FXCM Inc (NYSE:FXCM) had helped Chicago-based Infinium Capital Holdings, to stay in business by buying some of its assets.

Forex brokers made profits when currency peg existed. FXCM handled trades for individuals and clients which amounting to $1.4 trillion in the last quarter alone. However, no one foresaw the sudden end to the currency cap by Swiss central bank, a move that has left brokers seeking financial cover to stay afloat.

Shares of FXCM Inc (NYSE:FXCM) fell 92% in the Friday’s session before trading in the shares was halted.

About the Author

Stinson is US Markets Daily’s Senior Producer for News & Public Affairs.

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