Knight Capital Group Inc. (NYSE:KCG) comes back to
life after the Company managed to cover up its previously reported $400 million
pre-tax loss arising from routing error to NYSE. An arrangement with private
equity firms Blackstone and General Atlantic, and brokers Ameritrade and Stifel
Nicolas has been made for $400mn of convertible financing, convertible at
$1.50/share.
How Should Investors React To The Firm’s Recent
Turmoil, Get
Free Report
The convertible financing will be available in the
form of preferred security carrying dividend of 2%. The financing will have a
dilution impact of around 75% bringing the pro forma share count from 93
million shares to 359 million shares on as convertible basis.
KCG’s excess net capital held at its broker-dealer
Subsidiaries was $513 million at the end of first quarter 2012 with the
Subsidiaries also having a $200 million revolving credit facility. The debt
structure of KCG comprised of a $300 million convertible notes and $100 million
3-year term loan.
Analysts estimate that the Company’s ongoing business
activities will not be impacted but they are still unsure of the impairment
effect in 2013. Estimates for 2012 have been reduced to reflect the impairment
charges.
The loss had occurred when a routing error to NYSE
for shares of approximately 140 stocks due to technology failure had occurred
in the Company’s market-marking unit. The technology failure had been the
consequence of the installation of trading software, the malfunctioning of
which led to erroneous trade positions leading to a pretax loss of $440 million
hitting the Company’s Capital structure severely (around 41% of the tangible
equity at the end of the second quarter of 2012).
Should Investors Buy KGC Now? Get Trend
Analysis
Share of the company have slumped over 70% in the
past one week.
No comments:
Post a Comment