Jefferies Sees `Meaningful Markdowns' on Stock Amid Turmoil

  • CEO Handler says investment-banking deal flow is `sparse'
  • Firm is eliminating 2016 cash bonuses for Handler, Friedman

Jefferies Group, the investment bank owned by Leucadia National Corp., said the market turmoil this year has slowed dealmaking to a crawl and hurt the value of its stock holdings.

“New issue capital markets are barely open and investment banking deal flow is sparse,” Richard Handler, 54, chief executive officer, and Brian Friedman, 60, chairman of the executive committee, said Friday in a statement. “Similar to most market participants, we are experiencing some meaningful markdowns in equity positions held in inventory.”

The bank’s balance sheet and risk levels “remain consistent,” according to the statement. Its fixed-income division, which took losses on distressed-debt trading last year, is “thus far performing better," the executives said.

Leucadia, which also has beef processing, mortgage and energy businesses, said that it is eliminating cash bonuses for Handler and Friedman in 2016, and replacing them with restricted stock units. Each executive could receive stock this year worth $12.5 million to $25 million or more, depending on performance, according to a regulatory filing Friday. The shares would vest in 2018.

Last month, the New York-based company awarded Handler and Friedman bonuses of $6 million each for 2015, though the executives forfeited $4.9 million of stock due to the performance of Jefferies. Net income at Jefferies fell 38 percent to $98.1 million in the fiscal year ended Nov. 30 amid a slump in bond-trading revenue and the losses tied to energy bets. That helped push Leucadia stock down 22 percent last year after a 21 percent slide in 2014.

Before it's here, it's on the Bloomberg Terminal.