Leucadia National Comments on FXCM Inc.
Last year’s shareholder letter described the sudden and remarkable events that led to our January 2015 investment in FXCM (NYSE:FXCM). This year, we can report that our investment in FXCM is looking solid. Through the end of 2015, our $300 million senior secured term-loan has generated $166 million of principal, interest and fees to Leucadia and $193 million remains outstanding under the credit agreement. Drew Niv and the FXCM management team have done an excellent job stabilizing and even strengthening the business, all while selling off non-core assets in order to pay off our loan. FXCM has come a long way from the extraordinary event that led to our involvement, and it is well on its way to regain and hopefully exceed its historic position in the global foreign exchange market.
Our investment in FXCM is held at fair value and is marked-to-market each quarter. This has created significant short-term variability in Leucadia’s (and FXCM’s) earnings. We determine fair value with the assistance of a nationally recognized third-party valuation firm, and it is based on valuation models that are impacted by various inputs and assumptions, including, most significantly, FXCM’s publicly traded stock price and its volatility. We have had discussions with FXCM about restructuring our profit interest in a manner that is consistent with a sustainable long-term and value-enhancing strategy for both companies.
Source: GuruFocus
