Jefferies Confirms Fund Linked to First Brands Collapse, But Investment Banking Arm Remains Unscathed

Jefferies has moved to calm investors after a fund linked to the collapse of First Brands Group triggered concern in financial markets.

At an investor presentation, Jefferies executives said the troubled fund is part of the firm’s asset-management division, not its investment-banking arm. They stressed that the bank’s core advisory and trading operations are not exposed.

First Brands, a U.S. auto-parts maker, recently filed for bankruptcy with more than $10 billion in liabilities. A Jefferies-managed fund holds about $715 million in receivables tied to the company.

Chief Executive Rich Handler said the firm believes it “was defrauded” and intends to pursue legal options. But he added that any losses would be “readily absorbable” and would not threaten the health of the business.

Jefferies’ stock has been under pressure since the First Brands news surfaced. Some investors worried the failure could spill into Jefferies’ wider operations.

Company leaders pushed back on that idea. They said investment-banking and capital-markets activities remain insulated and continue to operate normally.

The First Brands collapse has stirred renewed scrutiny of the private-credit market, where many non-bank lenders hold similar corporate receivables. Analysts say more defaults could follow if funding conditions tighten.