Jefferies (JEF) investment bank has revealed that it has around $715M of exposure to First Brands Group. First Brands, an auto parts manufacturer that sells its products to major retailers, declared bankruptcy on September 28. Jefferies is starting to fall in pre-market trading, down 1.54% at 8:00 a.m. EST.
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Jefferies announced that it has about $715 million invested in customer invoices, or “receivables,” from retailers that sold First Brands products. It made the investments via Point Bonita Capital, which is a specialist invoice-finance fund Jefferies manages. The invoices are almost entirely from Walmart (WMT), NAPA, O’Reilly Auto Parts (ORLY), and Advance Auto Parts (AAP). First Brands is responsible for directing the retailers’ payments to Point Bonita.
On September 15, First Brands stopped directing the transfers of funds from the retailers to Point Bonita. Jefferies said, “We are in communication with First Brands’ advisors and are working diligently to determine what the impact on Point Bonita might be.”
On top of this news, the Financial Times reported earlier this week that Jefferies had earned fees in return for financing First Brands. Other lenders claim that the “deal sweetening” for Jefferies might have violated the terms of their credit agreements with First Brands.
How Is Jefferies Stock?
Year-to-date, JEF stock is down 23.1%. Only one analyst has covered it in the past three months, giving Jefferies stock a Hold rating.
