Jefferies Has More Dangers Ahead on the First Brands Fiasco

It’s never good when a company puts out a weekend statement to shore up a sliding share price. And that goes double when it’s a bank. This is where Jefferies Financial Group Inc. found itself on Sunday, addressing its entanglement with failing autoparts supplier First Brands Group.

Jefferies’ Chief Executive Officer Rich Handler and President Brian Friedman wrote in an open letter that investor reaction was “meaningfully overdone” after the investment bank’s stock had lost nearly one-quarter of its value since late September and its bonds sold off, too. In some ways, they seem right: The firm’s direct exposure to First Brands’ credit is relatively small at only about $45 million. But it’s not just the immediate losses that matter right now — it’s how the episode affects clients, investors and the perceptions of supervisors in the months ahead that could be much more difficult for its business.