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FXCM looks to restructure financing agreement as shares continue freefall

FXCM shares finish the week at all-time low

It's been a nightmare year for forex broker FXCM. They completely mismanaged risks in EUR/CHF trading and imploded when the Swiss National Bank removed the floor in the pair.

The company faced a massive cash crunch and had few alternatives after losing around $225 million overnight.

They turned to Jeffries parent company Leucadia for desperate financing and Leucadia did what lenders do to desperate borrowers. I'm sure the term 'vulture' has been tossed around the FXCM boardroom a few times.

The terms basically moved all the profits and upside to Leucadia and FXCM has suffered ever since. On a split-adjusted basis, shares have fallen to $5.31 today from $172 before the SNB.

Leucadia, meanwhile, bragged in May that it had tripled its $300m investment in FXCM, according to Bloomberg:

"The $300 million rescue loan and associated rights are now valued at $947 million, New York-based Leucadia said Friday in a regulatory filing. Jefferies Group LLC, Leucadia's investment bank, also charged FXCM a $21 million fee for putting the deal together, Leucadia said in a separate filing."

After the close Friday, FXCM released a statement to say they are committed to restructuring the existing agreement with "a sustainable long-term and value-enhancing strategy."

What they're really saying is that Leucadia has so thoroughly emptied the coffers that the business isn't able to invest in itself and run properly. Leucadia could continue to milk the cash cow dry in the smoulderinging wreckage of a barn that's left over the company; or they could ease up on the terms and fatten up the cash cow so they can continue to milk it for the long term.

Either way the shareholders are screwed but this way the clients will be better off. Then again, the statement is vague.

If you're looking for a forex broker, check our listing . We've added Dukascopy Europe to the list. If you're looking for someone solid and reputable, they're a broker I recommend.

What still eats me up is that I was seconds away from making a retirement trade on SNB day, read about it here .

Separately, here's a forex hedge fund manager's SNB war story.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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