Knight riders

6 August 2012 By Antony Currie Follow @AntonyMCurrie

The $400 mln rescue underscores the painful cost of its trading debacle and dilutes existing investors. But the saviors CEO Tom Joyce assembled include a good mix of rivals and clients. That should give him scope to rebuild Knight without having to bow to a rapacious cabal.

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Knight Capital Group is selling $400 million in convertible bonds with a 2 percent coupon to six investors to shore up its balance sheet. The move comes after a glitch in new trading software left the firm holding stocks it didn’t want, saddling it with $440 million in losses.

Investment bank Jefferies is leading the investment group. Other participants include Blackstone, Getco, Stephens, Stifel Financial and TD Ameritrade. The bonds can be converted into 267 million of common stock, which would leave the group owning 73 percent of Knight. The bonds can be converted for $1.50 a share. Knight’s stock closed on Friday at $4.05 a share and by early afternoon on Monday was trading at $3.15 a share.

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