$109.5M Max Loss Exposure due to FXCM Involvement, Jefferies Says

Investment bank, financial services provider, Jefferies Financial Group Inc, has submitted its quarterly report with the Securities and Exchange Commission (SEC), detailing Jefferies' engagement with FXCM Group LLC for the three months to end-August 2021.

In its most recent financial disclosures, FXCM reported total assets of 394.7 million. The maximum loss exposure for Jefferies as a result of its involvement with FXCM is limited to the carrying value of the term loan ($58.5 million) and the investment in associated company ($51.0 million), totaling $109.5 million at August 31, 2021. This estimate is much lower than the $123.3 million estimate reported at May 31, 2021.

Jefferies Group entered into a Forex prime brokerage agreement with FXCM in 2017. In connection with the foreign exchange contracts entered into under this agreement, Jefferies Group had $0.9 million and $2.7 million at August 31, 2021 and November 30, 2020, respectively, included in Payables, expense accruals and other liabilities in the Consolidated Statements of Financial Condition.

Jefferies’ investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2022 ($71.6 million principal outstanding at August 31, 2021), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity in FXCM.

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.