According to the report, Jefferies has a total debt to capital ratio of 90.4%, significantly higher than its closest peers. Goldman Sachs (GS) and Morgan Stanley (MS) have similar ratios near 88%, but they are significantly larger and have some federal support via their banking charters.
According to the agency, if Jefferies raises $1 billion in equity and reduces assets by $5 billion, it will reduce total debt to capital to only 86%.
"We will cut without major deleveraging," the firm said. Earlier this month, Egan Jones downgraded the firm's rating by a notch to BBB minus.Jefferies has been battling rumors about its survival after MF Global (MFGLQ.PK) filed for bankruptcy last month. Egan Jones has also cited the increased scrutiny on medium-sized brokers following the bankruptcy as one reason for its recent downgrade. Jefferies' management has since been in a communication overdrive in a bid to allay fears over its exposure to Europe.
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