$123.3M Max Loss Exposure due to FXCM Involvement, Says Jefferies

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-May 2021.

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According to Jefferies, it lacks the authority to direct the activities that have the greatest impact on FXCM’s performance, therefore it shall not be deemed as the primary beneficiary of the firm. Consequently, it does not consolidate FXCM and it accounts for its equity interest under the equity method as an investment in an associated company.

In its most recent financial disclosures, FXCM reported total assets of $397.7 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 ($59.2 million) and the investment in the affiliated company ($64.1 million), totaling $123.3 million as of May 31, 2021. This compared to a $130.9 million loss exposure in the previous quarter.

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

How FXCM performs is subject to a number of factors, from the conditions of global market to economic conditions which affect trading size and currency volatility, changes in regulation and others that might bring effects either directly or indirectly, a lot of which are beyond the control scope of Jefferies. As a result, Jefferies' results of operations or financial condition might be adversely affected.