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Jefferies Bonds Rebound From Selloff Sparked by MF Collapse

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Dec. 2 (Bloomberg) -- Bonds of Jefferies Group Inc. climbed for the fourth day this week as confidence in the broker-dealer recovers from a selloff sparked by the October collapse of MF Global Holdings Ltd.

The $550 million of 6.875 percent notes due in April 2021 rose 2.25 cents to 87.25 cents on the dollar as of 10:30 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities have climbed from 75 cents on Nov. 17, after a 25-cent drop over three weeks. The debt, which yields 8.9 percent, is trading at the highest price since Nov. 14, Trace data show.

Its debt has recovered from distressed levels as Chief Executive Officer Richard Handler seeks to reassure investors that the New York-based firm doesn’t face the types of leveraged and concentrated risks that forced MF Global into bankruptcy. That firm failed when investors lost confidence in its ability to manage a $6.3 billion bet on European sovereign debt.

Jefferies said twice last month that it cut its gross exposure to Greece, Ireland, Italy, Portugal and Spain and said, when accounting for hedges, it was net short $134 million, meaning overall it would gain as the debt deteriorated.

Its debt and equity also rose this week after an Oppenheimer & Co. analyst said that a report from Egan-Jones Ratings Co. that noted Jefferies should raise $1 billion in equity and reduce leverage contained errors.

Kohlberg, Miramax Deals

“Our report stands on its own,” Sean Egan, president of Egan-Jones, said Nov. 28 on Bloomberg Television’s “InBusiness with Margaret Brennan” in response to comments from Chris Kotowski, an analyst at Oppenheimer.

Jefferies was the most active manager of speculative-grade debt sold this week, arranging $290 million of the $1.04 billion issued. That included a $175 million bond offering by Optima Specialty Steel Inc., the steel producer buying Kohlberg & Co. LLC’s Niagara LaSalle Corp.

Jefferies also helped manage with Barclays Capital a debt sale by film producer Miramax that raised $500 million from securities backed by its library of more than 700 films and 14 television series.

It rose $1.10, or 9.7 percent, to $12.40 at 4:15 p.m. New York time, after climbing from $10.65 on Nov. 25.

To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net

To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net

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