Jefferies estimates max loss exposure due to FXCM involvement at $99.4M
Investment bank and financial services firm Jefferies Financial Group Inc (NYSE:JEF) has just filed its quarterly report for the three-month period to February 28, 2022 with the Securities and Exchange Commission (SEC), with the report offering an update on Jefferies’ involvement with FXCM Group LLC (FXCM).
Jefferies’ investment in FXCM and associated companies consists of a senior secured term loan due February 8, 2023 ($71.6 million principal outstanding at February 28, 2022), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM.
Jefferies Financial Group has determined that it is not the primary beneficiary of FXCM because it does not have the power to direct the activities that most significantly impact FXCM’s performance. FXCM reported total assets of $407.1 million in its latest financial statements.
Jefferies’ maximum exposure to loss as a result of its involvement with FXCM is limited to the total of the carrying value of the term loan ($50.3 million) and the investment in associated company ($49.1 million) at February 28, 2022. The total is $99.4 million, virtually unchanged from the estimate for the preceding quarter, when Jefferies put the maximum loss exposure due to its involvement with FXCM at $99.5 million.
Many factors, most of which are outside of Jefferies’ control, can affect FXCM’s business, including the state of international market and economic conditions which impact trading volume and currency volatility, changes in regulatory requirements and other factors that directly or indirectly affect the results of operations, including the sales and profitability of FXCM, and consequently may adversely affect Jefferies’ results of operations or financial condition.