It wasn’t easy to rescue foreign exchange broker FXCM from almost certain bankruptcy, but Jefferies CEO Richard Handler and his team spent a sleepless night doing just that, as reported by the Wall Street Journal. Leucadia, where Handler also serves as executive, and Jefferies were able to raise $300 million in financing in just 36 hours. FXCM will have to pay 10% interest, and Leucadia will receive a share of dividends and a decent share of the sale FXCM may make of segments. It isn’t an ideal scenario for FXCM, but is good for Jefferies and Leucadia, and preferable to bankruptcy.
Jefferies stepped in to save Knight Capital after an error in stock orders threatened the company. In the case of FXCM, it was the unexpected move by the Swiss National Bank to eliminate any cap on the value of the franc. The result was that customers owed FXCM $225 million, and the firm faced the possibility of a serious breach of capital requirements. FXCM CEO Drew Niv contacted Richard Handler, who managed to bail out Knight Capital in a manner what was relatively quicker than what could be expected from a private equity solution. Handler stepped in just as the bankruptcy filing was looming. If FXCM had not secured this deal, it would have had to take money from customers, a move that would have been disastrous for FXCM.
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