News Column

Fitch Rates Jefferies EUR500MM EMTN Unsecured Notes 'BBB-'

May 19, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a rating of 'BBB-' to Jefferies Group LLC's (Jefferies) EUR500 million senior unsecured notes issuance under its $2 billion Euro Medium Term Note (EMTN) programme. The notes will pay a coupon of 2.375% and are due in May 2020.

KEY RATING DRIVERS

The EUR500 million debt issuance ranks pari passu with Jefferies' other senior unsecured debt issuance, and therefore, the rating assigned to the notes is equalized with Jefferies existing long-term Issuer Default Rating (IDR) of 'BBB-'. The issuance does not result in a significant increase in leverage for the firm and therefore, there is no rating impact on Jefferies' IDR or Stable Rating Outlook. Proceeds are expected to fund Jefferies' European operations.

RATING SENSITIVITIES

The EMTN unsecured notes are equalized with Jefferies' IDR, and therefore would be expected to move in parallel with any changes in Jefferies' rating. Jefferies is wholly-owned by Leucadia National Corp. (Leucadia), and given the potential for capital flows between the two entities, their ratings are equalized.

Potential positive rating drivers related to Jefferies could include continued improvement and stability in profitability, and compensation cost containment over an extended period of time. Potential positive drivers related to Leucadia could include greater clarity as to the firm's strategic objectives and eventual execution of those objectives, particularly with respect to the deployment of its excess capital. Demonstrated commitment to a conservative liquidity profile, limited investment concentrations and modest leverage at the holding company would also be considered positive drivers. The interaction between Jefferies and Leucadia will continue to play an important role in the longer-term value and risk profile of the combined franchise, in Fitch's view.

Jefferies' and Leucadia's ratings could be negatively pressured by a material increase in leverage or a less conservative liquidity and/or funding profile at either entity. Jefferies' leverage remains at historically low levels and Fitch expects that over time, if markets remain stable, it may increase modestly. Ratings would also be negatively affected if Fitch perceives the risks taken in Leucadia's investment portfolio as increasing materially from current levels. Fitch will continue to assess the ability of Jefferies' management team to run both companies effectively. Furthermore, the unanticipated departure of key executives at either Jefferies or Leucadia could also result in negative actions.

Jefferies, a Delaware-incorporated holding company, is a well-established full-service investment banking and institutional securities firm primarily serving middle-market clients and investors. Its primary broker/dealer operating subsidiary, Jefferies LLC, holds the vast majority of the firm's consolidated assets and is regulated by the SEC. At Feb. 28, 2014, Jefferies had U.S. GAAP total assets of $43.4 billion and shareholders' equity of $5.4 billion (including non-controlling interests and $1.4 billion of goodwill from the recent merger). Fitch considers Jefferies to be a core subsidiary of Leucadia based on Jefferies' significance relative to Leucadia's equity and the likely role it will play in the combined company's future strategic direction.

Fitch has assigned the following rating:

--EUR500 million senior unsecured notes due May 2020 'BBB-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Securities Firms Criteria' (Jan. 31, 2014).

Applicable Criteria and Related Research:

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732556

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830686

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Ilya Ivashkov, CFA

Senior Director

+1 212-908-0769

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Tara Kriss

Senior Director

+1 212-908-0369

or

Committee Chairperson

Nathan Flanders

Managing Director

+1 212-908-0827

or

Media Relations, New York

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com


Source: Fitch Ratings


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