they own at least one of our children for three years
E*Trade Agrees To Lock Up Some Order Flow Through Citadel
Dow Jones Newswires - December 04, 2007 6:08 PM ET
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By Rupini Bergstrom
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The deal under which E*Trade Financial Corp. (ETFC) accepted a $2.55 billion cash infusion from hedge fund Citadel Investment Group also included an agreement to route all its customer options and a significant portion of stock order flow through Citadel for the next three years.
The company's 8-K filing to the Securities and Exchange Commission revealed that E*Trade Securities LLC has committed to route "substantially all of its customer orders in exchange-listed options" and 40% of orders for exchange-listed stocks to Citadel Derivatives Group LLC, for order handling and execution, for three years.
"This is actually revenue-neutral for us," E*Trade spokeswoman Connie Dotson told Dow Jones. "Citadel will pay the normal rate for these orders, and we will continue with our own market-making operations through E*Trade Capital Markets."
Dotson also said that asset manager BlackRock Inc. (BLK), which is one of a number of investors raising funds to buy distressed assets including mortgages, made a capital commitment of $100 million as part of the deal, for which BlackRock Investors will be issued an equal amount in aggregate principal of springing lien notes at 12.5%.
When the deal was announced Thursday, BlackRock declined to say how much it had invested.
Citadel, well-known for being an opportunistic financier of last resort to companies in distress, agreed last week to inject $1.75 billion into E*Trade in exchange for notes, stock equal to just under 20% of E*Trade's current total and a board seat.
The hedge fund will also pay $800 million to relieve E*Trade of a $3 billion portfolio of mortgage-linked securities. Citadel's purchase, at just 27 cents on the dollar, shows how toxic such securities have become, but signaled there is a market somewhere for mortgage-related debt. E*Trade will take a $2.2 billion charge to reflect its loss on the sale, hurting its earnings, and shareholders will be diluted by the stock issued to Citadel.
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they get the whole family when we dump the rest |
