FXCM slips following details of Leucadia financing; SunEdison launches $350 million deal

By Rebecca Melvin

New York, Jan. 20 – FXCM Inc. weakened in active trade on Tuesday following the release of details on the New York-based foreign exchange company’s financing arrangement from Leucadia National Corp.

FXCM shares, which were halted on Friday pending news, reopened Tuesday and promptly collapsed nearly 90% to as low as $1.28.

FXCM was a primary focus of the convertibles market for a second straight day on Tuesday after accounting for the lion’s share of Friday’s action after the company warned of massive client losses tied to a spike in the Swiss franc.

Markets were closed on Monday for the Martin Luther King Jr. holiday.

Elsewhere, Aegerion Pharmaceuticals Inc.’s 2% convertible were indicated to have traded up 5 or 6 points to 90 as shares of the Cambridge, Mass.-based biopharmaceutical company jumped about 10%.

Illumina Inc.’s convertibles were also indicated higher with shares of the San Diego, Calif.-based life sciences company up 7%.

The Illumina 0.25% convertibles were seen up at 235, which was up from 220, according to a market source.

Moving in the opposite direction, Canadian Solar Inc.’s convertibles traded lower with shares of the Markham, Ont.-based solar power component company down 10%. The Canadian Solar 4.25% convertibles due 2019 were seen to have traded at 84.66 on Trace data.

One New York-based firm hadn’t made a market in the Canadian Solar bonds, but it had traded SunPower Corp.’s 4.5% convertibles due in March at 160.5.

Elsewhere, the convertibles market saw no discernable themes, a second New York-based trader said. He added that he thought trading would be generally quiet ahead of the latest monetary policy news from the European Central Bank on Thursday.

“Everyone is waiting for ECB QE announcement this Thursday,” the trader said.

There is growing speculation that the ECB will expand its asset purchases as it sets monetary policy.

In economic news, China’s economic growth was better than expected last quarter, helping the full-year expansion remain close to the government’s target. China’s gross domestic product rose 7.3% in the three months ended December from a year earlier, the statistics bureau said.

The economy expanded 7.4% in 2014.

In addition, the International Monetary Fund cut its forecast for global growth in its latest World Economic Outlook report to 3.5% for 2015 and 3.7% for 2016. That was down by 0.3% for both years.

But the IMF raised its forecast for the United States to 3.6% growth in 2015, up from 3.1% in October.

After the market close, SunEdison Inc. launched an offering of $350 million of 7.25-year convertible senior notes that were expected to price late Wednesday and were talked to yield 2.125% to 2.625% with an initial conversion premium of 32.5% to 37.5%.

FXCM slips

FXCM’s 2.5% convertibles due 2018 traded early at about 50 and then slipped to 49 before settling lower to around 43. The bonds had dropped to as low 30 on Friday and then traded for a while at 49 bid, 50 offered, before climbing up to the mid-60s. The bonds were previously at 95.

FXCM shares were halted for the entire session but fell about 90% to $1.49 in pre-market action.

“Terms of the bailout are dictating price. People thought Leucadia was going to give them a free ride, I guess,” a New York-based trader said.

Under the Leucadia financing agreement, which allowed FXCM to meet its regulatory capital requirements and continue normal trading operations, a new subsidiary was formed into which FXCM Holdings LLC contributed all of the equity interest owned to FXCM Newco LLC.

The loan has an initial interest rate of 10% per year, rising by 1.5% per year each quarter for as long as it is outstanding to a cap of 17%. The loan is subject to conditions and terms such as requiring mandatory prepayments and requiring lender consent to merge, dissolve, or sell or lease assets.

The credit agreement requires monthly payments of the term loan from proceeds received during the immediately preceding calendar month from accounts receivable related to the customer debit balances referenced above.

In connection with the financing, the parties also entered into an agreement that provides, among other things, that Newco will pay in cash to Leucadia and its assignees a percentage of the proceeds received in connection with certain transactions, including any asset sales, any dividend or sale of all or substantially all of Newco’s assets.

The initial moves were sparked by FXCM’s statement late Thursday that it may be in breach of capital requirements following the Swiss National bank’s surprise currency move. The bonds recovered some ground, apparently amid reports that Jefferies was working to throw them a financial lifeline, market sources said. After the market close, news of that lifeline was forthcoming.

SunEdison to price

SunEdison, the St. Peters, Mo.-based developer, maker and marketer of silicon wafers, said it plans to price $350 million of convertible senior notes talked to yield 2.125% to 2.625% with an initial conversion premium of 32.5% to 37.5%

The Rule 144A deal of 7.25-year notes has a $52.5 million greenshoe and was to be sold via joint bookrunners Goldman Sachs & Co., Barclays, Macquarie Capital (USA) Inc. and Morgan Stanley & Co. LLC.

The notes are non-callable, and the deal is coming with a call spread.

There is takeover protection and full dividend protection in the form of a conversion rate adjustment.

Proceeds will be used to fund a portion of the company’s acquisition of First Wind Holdings LLC and about $119.1 million to repay all or a portion of indebtedness incurred to purchase 1.6 GW of production tax credit qualified turbines.

Remaining proceeds will be used to fund working capital, accelerate growth of the business and for other general corporate purposes and fund the cost of capped call transactions.

In connection with the pricing of the notes, the company plans to enter into capped call transactions with counterparties that may include the initial purchasers.

Mentioned in this article:

Aegerion Pharmaceuticals Inc. Nasdaq: AEGR

Canadian Solar Inc. Nasdaq: CSIQ

FXCM Inc. Nasdaq: FXCM

Illumina Inc. Nasdaq: ILMN

SunEdison Inc. Nasdaq: SUNE

SunPower Corp. Nasdaq: SPWR

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