Global Brokerage issues going concern warning, looks to refinance notes

By Angela McDaniels

Tacoma, Wash., May 15 – Global Brokerage, Inc. said there is substantial doubt about its ability to continue as a going concern, and the company is working with financial and legal advisers to explore refinancing alternatives for its $172.5 million 2.25% senior convertible notes due June 15, 2018.

On May 2, the Nasdaq Stock Market notified the company that the market value of its publicly held shares was less than $15 million for the prior 30 consecutive business days, which does not meet the requirement for continued listing.

This notification has no immediate effect on the company’s listing, but the market value of its publicly held shares must exceed $15 million for 10 consecutive business days between May 2 and Oct. 30 to avoid delisting.

If the company fails to remain listed, the holders of the convertibles will have the right to put back their convertibles to the company at par plus accrued interest, according to a 10-Q filing with the Securities and Exchange Commission.

As of March 31, the company’s cash and cash equivalents were $154.9 million. However, the company noted that it is primarily a holding company with limited business operations, and substantially all of its income-generating assets, as well as its cash and cash equivalents, are held by FXCM Group, LLC and its subsidiaries. Accordingly, the company’s only source of cash to pay interest and principal on its outstanding debt are distributions relating to the company's ownership interests in FXCM from the net earnings and cash flows generated by FXCM.

The company has only an indirect interest in FXCM through its 74.5% interest in Global Brokerage Holdings, LLC, which in turn owns 50.1% of FXCM. Only a limited percentage of cash distributions by FXCM are allocated to Global Brokerage Holdings.

In addition, earnings and cash flows generated by FXCM are first applied by FXCM in conducting its operations, including the service of its debt obligations, after which excess cash flow may be paid to its shareholders.

The company believes it could be difficult to procure the requisite liquidity should the holders of the convertibles exercise their put options. The company’s inability to comply with this requirement would be an event of default.

Accordingly, the company believes that the potential delisting raises substantial doubt about its ability to continue as a going concern.

Global Brokerage, formerly FXCM Inc., is based in New York. FXCM Group is an online provider of foreign exchange trading, contracts for difference trading, spread betting and related services to retail and institutional customers.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.