Argentex seeks emergency cash and takeover after liquidity crunch

By Sinead Cruise, Chandini Monnappa

LONDON (Reuters) -British currency risk management company Argentex is in advanced talks with IFX Payments about a possible offer and emergency funding as it battles to defend the business from whipsawing currency markets.

Argentex on Wednesday said liquidity had deteriorated following margin calls, forcing the firm to step up talks with liquidity providers.

The London-listed company is one of the first known casualties of an extended bout of financial market turbulence.

It had suspended its shares from trading on Tuesday following sharp falls in the U.S. dollar, as trade tensions and President Donald Trump's criticism of Federal Reserve Chair Jerome Powell spooked investors into dumping U.S. assets.

"This further reduction in liquidity necessitates an immediate cash injection to ensure the company's continued solvency, without which the board would have to take immediate steps to secure the company's future," Argentex said.

The dollar had traded near multiyear lows versus the euro and Swiss franc on Tuesday, while the yen hit a seven-month high. Argentex said it faced pressures on its currency derivatives activities, FX forwards and options.

Although discussions with IFX were advanced, Argentex said there was no certainty a firm offer would be made.

Argentex also said it was also discussing the terms of an initial bridging loan with IFX Payments to bolster near-term liquidity. The loan would provide immediate working capital flexibility but remained subject to agreement, it said.

If the bridging loan was not agreed, Argentex said its board would take "immediate steps" to protect value in the business for the company's creditors and other stakeholders.

Barclays and Citi are among the top-tier banks that have counterparty relationships with Argentex, according to its website. Barclays and Citi declined to comment.

Forex market volatility can pose additional stresses on small FX brokers, some of which offer more relaxed terms on margin requirements to end-clients than the terms they are held to by their banks and liquidity providers, said Jackie Bowie, managing partner and head of EMEA at Chatham Financial.

"When the currency markets move as much as they have, the FX brokers will face margin calls from their banks, but might not always be receiving that same level of collateral from their customers," Bowie said.

Argentex did not immediately respond to a request for comment on its margin arrangements but it has attracted several determined suitors for its business notwithstanding the threat to its solvency.

The company said it had received and rejected two additional nonbinding proposals, including from payment services provider Lumon Acquisitions and from Argentex's former CEO, Harry Adams.

Separately on Wednesday, Lumon said it was prepared to make a firm offer for Argentex and urged it to resume talks. Lumon is backed by alternative asset manager Pollen Street, which invests in financial and business services, and technology.

Trading in Argentex's ordinary shares on London's AIM will remain suspended pending a further announcement regarding the offer and loan, the company said.

(Reporting by Sinead Cruise in London and Chandini Monnappa in Bengaluru; Additional reporting by Lawrence White, Anousha Sakoui, Amy-Jo Crowley, Charlie Conchie and Nell Mackenzie. Editing by Jan Harvey, Bernadette Baum, Elisa Martinuzzi and Matthew Lewis)