Knight Capital heads into make-or-break weekend

Fri Aug 3, 2012 10:56pm EDT
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By Edward Krudy and Greg Roumeliotis and Sarah N. Lynch

(Reuters) - Knight Capital Group Inc's future remained in flux as it headed into the weekend trying to clinch a rescue deal, but there was skepticism on Wall Street that one of the largest U.S. equities trading firms would find a suitor before Monday.

Knight was plunged into crisis on Wednesday when it lost $440 million, most of its capital, after a software glitch caused it to make thousands of unintended trades on about 140 stocks.

Knight said on Thursday it was actively pursuing strategic and financing alternatives.

Early on Friday unconfirmed reports that the company had received a line of credit led to a partial recovery in its stock price and helped persuade some major clients to resume trading with the firm.

At least one private equity firm, TA Associates, signed a non-disclosure agreement with the firm, a signal that it was looking at Knight's books for a potential acquisition or investment. TA Associates was not immediately available for comment. Knight did not respond to calls on Friday.

Sources familiar with the plans of some other private equity firms said they would be looking at Knight as well.

But sources at some other U.S. private equity firms that are active in the financial services sector said they had been approached by Knight's advisers Sandler O'Neill but decided not to pursue a deal with the firm.

"To go in fast and take a lot of risk - usually you do that when the terms and the price are safe," said a senior private equity executive whose firm was approached but decided not to pursue Knight.   Continued...

A trader works at the Knight Capital kiosk on the floor of the New York Stock Exchange August 1, 2012. REUTERS/Brendan McDermid