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FXCM shares sink 86% in pre-market trade amid loan details

Published 01/20/2015, 08:21 AM
Updated 01/20/2015, 08:21 AM
FXCM shares plunge in pre-market trade as it discloses loan details

Investing.com - Struggling online foreign exchange trading broker FXCM (NYSE:FXCM) saw shares plunge as much as 88% in pre-market trade on Tuesday after providing further details regarding the $300 million rescue package it received from Leucadia National last week.

According to the agreement, the initial interest rate of 10% will rise by 1.5% each quarter as long as the loan is outstanding to a maximum of 17%. The package also includes limitations on FXCM’s ability to merge, dissolve or sell assets.

As part of the agreement, Leucadia will get a percentage of the proceeds from certain transactions, such as any sale of assets or a dividend.

FXCM also has to pay a deferred financing fee of $10 million and may have to pay an additional fee of up to $30 million if certain conditions are not met.

FXCM warned last Thursday that volatility in currencies markets following the Swiss National Bank's shock decision to abandon its minimum exchange rate cap against the euro triggered losses that left its customers owing it about $225 million.

On Friday, FXCM and Leucadia, the holding company for investment bank Jefferies Group, announced the $300 million two-year financing agreement.

FXCM said net proceeds of the loan will cover negative client balances and pay down outstanding revolving debt.

FXCM shares plummeted $10.87, or 86.06%, in trading prior to the opening bell to $1.81 from a closing price of 12.63 on January 16. Markets in the U.S. were closed on Monday for the Martin Luther King, Jr. holiday.

Meanwhile, the outlook for U.S. equity markets was modestly higher. The Dow futures indicated a gain of 0.45%, the S&P 500 pointed to a rise of 0.5%, while the tech-heavy Nasdaq 100 indicated an increase of 0.65%.

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