Http://nypost.com/2015/01/20/punitiv...fxcm-on-ropes/
One currency broker is paying a high price for money.
FXCM, which saw itself on the wrong end of the Swiss franc trade a week when the currency made unprecedented gains against the euro, consented to a two-year deal with Leucadia National that hikes up the interest rate every quarter and limits how it can pay the loan, a regulatory filing Tuesday revealed.
The ”punitive” deal, which uses the company's assets as collateral, can force the company into bankruptcy, said Rich Repetto, an analyst at Sandler O'Neill. ”[Leucadia is] looking to be sure they protect themselves and make a good return.”
If FXCM doesn't pay back the loan early, the 10 percent interest rate rises by 1.5 percentage points every three months to a 17 percent cap, according to the filing. The broker can only pay back the loan from trading profits.
The broker will probably try to sell itself by April, according to an analyst report put out by Citigroup.
Leucadia is the parent company of Jefferies, the bank that purchased Knight Capital after the broker went awry at 2012.
FXCM shares plummeted almost 88 percent on Tuesday to $1.60, its first trading day since the franc soared.