Jefferies Financial Group has revealed that its Leucadia Asset Management fund holds approximately $715 million in receivables linked to First Brands Group, the auto-parts maker that recently filed for bankruptcy protection. The disclosure impacted Jefferies’ stock, which was down 2% in afternoon trading on Wednesday. First Brands filed for bankruptcy late last month, citing over $10 billion in liabilities, which has shaken debt investors. Jefferies is a global investment bank and capital markets firm, providing financial advisory services. Leucadia Asset Management is the asset management division of Jefferies.
UBS also reported on Wednesday that it is assessing the impact of First Brands’ bankruptcy on several of its investment funds, with exposure exceeding $500 million. First Brands halted timely payments from obligors to Point Bonita, a fund managed by Leucadia, on September 15. Point Bonita Capital invests in trade-finance assets by purchasing receivables from companies like First Brands, subsequently collecting payments from major retailers on behalf of the fund.
Jefferies stated they are in communication with First Brands’ advisors, working to determine the potential impact on Point Bonita and its investors. The firm intends to protect the interests and enforce the rights of Point Bonita and its investors. Analysts at Morgan Stanley estimate Jefferies’ maximum potential loss at around $44.6 million. They anticipate the bank will offer more clarity on any impairment charges in the fourth quarter.
The financial difficulties at First Brands, coupled with the recent bankruptcy of subprime auto lender Tricolor Holdings, have unsettled debt investors and fuelled concerns about broader stress in corporate debt markets, according to bondholders and bankruptcy experts. First Brands, a privately held company producing replacement components for the automotive aftermarket, grew through debt-financed acquisitions of rival auto parts companies.
