Jefferies fund holds $715 million in First Brands’ trade debt: Report
(Bloomberg) — An asset manager controlled by a unit of Jefferies Financial Group Inc. has invested nearly a quarter of its $3 billion trade finance portfolio in receivables tied to auto parts supplier First Brands Group Inc., the bank said Wednesday.
In his statement, Jefferies said in Point Bonita Capital’s portfolio, Walmart Inc. and AutoZone Inc. Approximately $715 million has been invested in outstanding receivables from First Brands’ customers, including the company, and the auto parts supplier is responsible for routing payments to Point Bonita. Problems with receivables arose because the company stopped making these payments on September 15.
Jefferies also said most of its exposure to the now-bankrupt company comes from Point Bonita, a division of the firm’s Leucadia Asset Management, which manages trade finance assets on behalf of third-party investors. According to the statement, Leucadia has an equity share of $113 million in this fund.
Jefferies also has a 50% stake in Apex Credit Partners, which holds approximately $48 million in loans to First Brands through secured loan obligations.
Analysts at Morgan Stanley estimate that Jefferies faces a potential loss of $44.6 million due to First Brands. They stated that this would be a “manageable” blow to the company’s tangible equity capital.
The disclosure reveals more about Jefferies’ ties to First Brands, a supplier of wiper blades and oil filters that filed for bankruptcy last week after its debt refinancing was derailed by investor scrutiny. Jefferies was negotiating a refinancing of the company, and many of Wall Street’s biggest names faced losses due to their involvement with First Brands.
Court documents earlier this month showed funds under the UBS Group AG umbrella exposed more than half a billion dollars to the auto supplier.
It’s the latest blow in the murky world of trade finance, an industry hit by a spate of frauds in recent years, often leaving banks and insurance companies facing losses. The biggest collapse in the industry occurred in 2021, when Greensill Capital filed for bankruptcy after diverting bank deposits and insurance funds into short-term loans to risky companies, ultimately contributing to the collapse of Credit Suisse Group AG.
Jefferies noted that First Brands stated in its bankruptcy filing that its special advisors were investigating whether receivables were transferred to third-party factors after they were received and whether receivables were transferred to more than one factor.
(Updates with Morgan Stanley analyst comments in fifth paragraph. An earlier version of this story has been corrected to clarify the nature of Jefferies’ contact with First Brands.)
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