(Reuters) -Jefferies’ fund caught up in the collapse of auto parts maker First Brands is separate from its investment banking business, its top executives said at the bank’s investor day.
“The Point Bonita fund in asset management sits absolutely separate, distinct and apart from whatever happens in investment banking. Kind of Chinese Wall 101,” Jefferies President Brian Friedman said at the event held on Thursday.
“The two have absolutely no relationship and, in fact the decision in 2019 of the asset management Point Bonita team to engage with First Brands, was absolutely away from independent and disconnected from anything on the investment banking side,” he said, according a regulatory filing released on Friday.
The collapse of First Brands, just days after subprime lender and dealership Tricolor went belly up, has unsettled Wall Street’s multitrillion-dollar credit market.
“I’ll just say this is us personally, we believe we were defrauded,” Jefferies CEO Rich Handler said, adding that despite this the environment remains generally good.
“I’m not saying there aren’t other issues like this. There was one yesterday that one of our competitors had to deal with. I think there’s a fight going on right now between the banks and direct lenders who each want to point fingers at each other and say, it’s your fault, no, it’s your fault.”
U.S. regional bank stocks fell on Thursday after Zions Bancorporation disclosed it would take a $50 million charge-off in the third quarter. Western Alliance also alleged fraud against a borrower and disclosed it had initiated a lawsuit.
Jefferies’ stock slumped after First Brands disclosed more than $10 billion in liabilities in bankruptcy protection filing in late September.
Earlier this month, the investment bank said its exposure to First Brands is limited and any potential loss would be “readily absorbable”.
The bank called the share reaction overdone while disclosing that its Leucadia Asset Management fund holds about $715 million in receivables linked to First Brands.
(Reporting by Manya Saini in Bengaluru; Editing by Arun Koyyur)
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