* Pre-tax charge made up of severance costs, lease write
* Alan Lhota, co-head of institutional fixed income, leaving
NEW YORK, March 19 Automated trading firm Knight
Capital Group said it expects a pre-tax charge of
between $27 million and $33 million related to the recent
agreement to sell its institutional fixed-income sales and
trading business to Stifel Financial Corp.
Employee severance and benefit costs make up $12 million to
$15 million of the charge, while the write-down and loss related
to its sublease of office space in Greenwich, Connecticut adds
$11 million to $13 million, according to a regulatory filing on
Tuesday. The remaining $4 million to $5 million of the charge
comes from professional fees and contract termination costs.
Knight, which recently agreed to be bought by Getco Holding
Co for $1.4 billion, said that Alan Lhota, currently co-head of
institutional fixed income, would be leaving the company.
Stifel said last week it would buy Knight's fixed income
business for an undisclosed amount.
The institutional fixed income unit employs around 60 people
in sales and trading in the United States and 40 in Europe,
covering high-yield and investment-grade corporate bonds,
asset-backed and mortgage-backed securities, and emerging
markets, as well as fixed income research.
A spokesman for Knight said the company is not disclosing
where the layoffs will take place.
Knight was forced to take on additional investors and
re-examine its entire business following a software problem in
August that led to millions of unintentional orders flooding
into the market over a 45-minute period, leaving Knight with a
huge position it had to unload at a loss of $461.1 million.
Following the glitch, Knight secured $400 million in rescue
financing - in exchange for a more than 70 percent stake in the
company - from a group of investors that included Chicago-based
Getco, as well as St. Louis-based Stifel, and was led by
Jefferies Group Inc.
Separately, Knight said last month it would lay off 5
percent of its global workforce as part of efforts to
restructure the firm. It said it expected to incur a pre-tax
charge of between $9 million and $11 million in the first
quarter as a result of combining its voice and electronic sales
teams and winding down its correspondent clearing operations.
Knight also has a major market making business that executes
up to around 10 percent of U.S. stock transactions, as well as
foreign exchange and bond trading operations, and reverse
mortgage origination and asset management units.