Jefferies stock rises after CEO addresses First Brands bankruptcy impact

Investing.com -- Jefferies Financial Group (NYSE:JEF) stock rose 4% on Monday after CEO Rich Handler issued a letter addressing the company’s exposure to the recent First Brands Group bankruptcy.

The letter, co-signed by President Brian Friedman, sought to clarify Jefferies’ limited financial exposure to First Brands, which filed for bankruptcy in late September after lenders grew concerned about off-balance-sheet financing used for cash flow management.

Handler emphasized that Jefferies’ potential exposure is manageable, with investments comprising just $43 million (5.9%) in Point Bonita’s accounts receivables purchased from First Brands and a small $2 million interest in First Brands’ bank loans through Jefferies Finance’s Apex platform.

"Relative to the scale of Jefferies, we are confident that any losses or expenses from these investments or otherwise in respect of First Brands can readily be absorbed and do not threaten our financial condition or business momentum," Handler stated in the letter.

The company highlighted its strong financial position, noting it had $10.5 billion in total equity and $11.5 billion in cash as of August 31, 2023. The letter also addressed several concerns, including allegations about undisclosed fees, which the company firmly denied.

Jefferies also clarified that management and incentive fees from Point Bonita represent only 0.8% of the company’s net revenues for the twelve months ended August 31, 2023.

The bankruptcy has attracted significant attention as it has ensnared several major financial firms. Jefferies maintains that the issues at First Brands resulted from decisions and actions at that company, including possible fraudulent activity currently under investigation by First Brands’ Chief Restructuring Officer and reportedly by the U.S. Department of Justice.

Jefferies plans to provide more details about its business outlook at its Annual Investor Meeting scheduled for Thursday.