Jefferies puts maximum loss exposure due to involvement with FXCM at $80M
Investment bank and financial services firm Jefferies Financial Group Inc (NYSE:JEF) has just filed its quarterly report for the three-month period to August 31, 2022 with the Securities and Exchange Commission (SEC).
The report outlines, inter alia, Jefferies’ involvement with provider of online Forex trading services FXCM Group, LLC (FXCM).
FXCM reported total assets of $401.2 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 ($30.1 million) and the investment in associated company ($49.9 million) at August 31, 2022. This is markedly lower than the estimate of $103.1 million at the end of May 2022.
Jefferies’ investment in FXCM and associated companies consists of a senior secured term loan due May 6, 2023 ($39.6 million principal outstanding at August 31, 2022), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM.
Jefferies Group entered into a foreign exchange prime brokerage agreement with FXCM in 2017. In connection with the foreign exchange contracts entered into under this agreement, Jefferies Group had $0.6 million and $0.7 million at August 31, 2022 and November 30, 2021, respectively, included in Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition.
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.