Knight Capital Group Inc. (KCG:US)’s bonds surged for a second day after the market maker said it raised $400 million by selling convertible preferred securities to cover losses from a software failure.
The company’s $375 million of 3.5 percent convertible bonds due in March 2015 jumped 8.4 cents to 87.4 cents on the dollar at 2:11 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt, which traded as low as 40 cents on the dollar on Aug. 2, is yielding 9.1 percent, down from 20.5 percent last week.
Knight, whose market-making unit executes about 10 percent of U.S. shares, has been fighting for survival (KCG:US) since a computer malfunction spurred price swings of 10 percent or more in dozens of companies on Aug. 1. That led to a $440 million loss, almost quadruple the firm’s 2011 net income.
Investors agreed to buy preferred stock that will be convertible into about 267 million common shares, the company said today. Getco LLC, an automated trading firm, Blackstone Group LP, brokerages Stifel Nicolaus & Co. and TD Ameritrade Holding Corp. (AMTD:US), and the investment banks Stephens Inc. and Jefferies Group Inc. are investing, according to a statement. The new investors will own about 73 percent of the company once the 2 percent preferred shares are converted into stock, according to calculations based on Bloomberg data.
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