By Devika Madhusudhanan Nair and Shubham Kalia (Reuters) -US investment bank Jefferies said on Sunday its exposure to bankrupt auto parts maker First Brands Group is limited and any potential losses would be “readily absorbable,” as it sought to reassure investors following a slump in its shares last week. First Brands, which makes filters, brakes […]
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Jefferies expects limited fallout from First Brands’ bankruptcy
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By Devika Madhusudhanan Nair and Shubham Kalia
(Reuters) -US investment bank Jefferies said on Sunday its exposure to bankrupt auto parts maker First Brands Group is limited and any potential losses would be “readily absorbable,” as it sought to reassure investors following a slump in its shares last week.
First Brands, which makes filters, brakes and lighting systems for the automotive industry, filed for bankruptcy protection last month after its lenders began investigating irregularities in the company’s financial reporting.
Last week, Jefferies disclosed that its Leucadia Asset Management fund, through its credit fund Point Bonita, held about $715 million in receivables linked to First Brands.
In a letter addressed to clients and shareholders and posted publicly on Sunday, Jefferies CEO Rich Handler and President Brian Friedman said the bank’s investments in the U.S. auto parts maker “effectively comprise” $43 million of Point Bonita’s accounts receivables from the bankrupt group and a $2 million interest in First Brands’ bank loans.
“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 and Friedman said.
“We believe there has been an impact on our equity market value and credit perception that is meaningfully overdone, and we expect this to correct soon as the facts and range of outcomes are better understood.”
Jefferies’ shares fell more than 18% last week.
Reuters reported on Friday that Morgan Stanley’s asset management unit had asked Jefferies to return some money it invested in the Point Bonita Capital fund, citing a person familiar with the situation.
First Brands has $11.6 billion in total liabilities, while its CEO Patrick James is considering leaving his position.
Swiss bank UBS has noted exposure of more than $500 million to the auto parts maker.
The U.S. Justice Department has launched a probe into First Brands’ dealings with creditors and sent an inquiry to the company, Reuters reported earlier this month.
(Reporting by Devika Nair in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)