Jefferies Fund Indirectly Exposed to First Brands

Bloomberg

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00:00Jeffreys revealed a $715 million exposure to the bankrupt auto parts maker First Brands Group.

00:07Let's bring in Bloomberg's Catherine Doherty for more.

00:09This is the bankrupt now First Brands Group, which took a lot of people by surprise.

00:13$715 million sounds like a lot. Is that meaningful for Jeffreys?

00:16So for Jeffreys specifically, it is not a direct exposure. So no.

00:21This is an asset manager that is controlled by a unit of Jeffreys.

00:27And so Jeffreys came out today. And really, this is reflective of what many firms have started to do,

00:33which is tell investors this is our potential exposure to First Brands.

00:40And they're having to do this through entities of entities.

00:44And in Jeffreys' case, this is Point Bonita Capital.

00:48And it's a portfolio that they're acknowledging it's a $715 million loss.

00:54However, that $715 million, only a small portion of that is directly tied to a Jeffreys unit.

01:03So really, what we've now seen is many analysts are sifting through the information that we do have Jeffreys today,

01:11again, coming out in their own filing and saying that they have this exposure through Point Bonita.

01:17They also have a separate exposure through some CLOs within Apex, which is another Jeffreys affiliate.

01:26So there's a lot of moving parts here.

01:29And Jeffreys is not alone.

01:31We have some other headlines today regarding UBS and Cantor.

01:36Cantor is asking UBS to redefine some terms in their own negotiations.

01:42And this is also because of direct exposure to First Brands.

01:47You also have Western Alliance coming forward and discussing its own exposure to First Brands.

01:55I believe that this will not be the end.

01:57It's a very complex.

01:58And that's why these firms are really sifting through every single affiliate that they have

02:03to determine exactly how much of a hit it will be.

02:07So there's a lot to untangle here.

02:08And you could see it with the share price of Jeffreys on an intraday basis.

02:12The stock certainly fell in the first 30 minutes of trading before pairing some of its losses.

02:17And it's only down 1.3 percent.

02:19You've been covering these kinds of stories for a while now.

02:22How long does it take to kind of uncover and untangle everything?

02:25So with a bankruptcy, this could go on for months.

02:29And what was interesting is in its own filing today, Jeffreys noted that there is an investigation

02:36going on within their bankruptcy and the advisors that are working on and with First Brands are

02:43looking into whether these receivables, which is tied to that $715 million potential exposure

02:50that we talked about, they're looking into whether those receivables had been turned over

02:54to third parties and whether those receivables also may have been factored in more than once.

03:01So they're looking basically to answer the question, were these double counted?

03:05So there's a lot of questions of was there fraud?

03:08Was there miscounting?

03:09And these probes, this investigation is going to come out through the bankruptcy process.

03:14And also with all of these firms being potentially exposed, they're going to be doing their own

03:19due diligence and looking at how it all unfolded.

03:22They're going to come out through the bankruptcy process, they're going to be doing their own

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