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On November 2, Egan Jones cut Jefferies ratings to BBB- from BBB, prompting the New York -based company's shares to tumble 20% to post crisis lows below $10 a share. It sparked a fight between two reputable but small players, which has culminated in today's heavyweight uppercut jab by Jefferies and its chief executive of over a decade, Rich Handler.

In Monday's letter, Jefferies wrote "throughout the month of November, Jefferies has been barraged by a group of people maliciously spreading rumors, half-truths and outright lies through every means possible." The biggest half-truth Jefferies highlighted was an alleged exposure to peripheral European debt.

In a Nov. 2 report, Egan Jones wrote that "we are concerned about the values included in the $2.7 billion of "sovereign debt" obligations...representing 77% of shareholders equity." The number excluded offsetting derivative hedges to debt positions that made Jefferies net exposure to debts negligible.

Of the ratings note, Jefferies wrote, "We were both shocked and perversely amused when the analyst who first misled the public about our sovereign debt exposure being 77% of our shareholders' equity actually had the temerity to state on widely broadcast television that he omitted the material fact that we had almost equal and offsetting short sovereign debt positions because, and we quote, he had "space constraints."

Later, on Nov. 7, Jefferies reported that it liquidated nearly 50% of its gross sovereign debt exposure, or $2.2 billion, with "no meaningful profit or loss" and in today's letter the company wrote "by now, everyone should recognize Jefferies is the firm with the least exposure to the sovereign debt of Greece, Ireland, Italy, Portugal and Spain of all of our major competitors."

After the liquidation and the Jefferies press release, Egan Jones then issued a new ratings note that said, "missing the point - the primary reason for our cutting last week was the changed environment. The problems of MF (e.g., the debilitating freezing of 150K accounts) have increased scrutiny of other medium-sized broker dealers. The secondary issue for our cut was leverage," citing Jefferies's 12.9 times leverage ratio.

About the ratings update, Jefferies wrote of Egan Jones in another pointed jab in today's letter, "we were both shocked and perversely amused when the analyst who first misled the public about our sovereign debt exposure being 77% of our shareholders' equity actually had the temerity to state on widely broadcast television that he omitted the material fact that we had almost equal and offsetting short sovereign debt positions because, and we quote, he had "space constraints." (By the way, that same analyst also points to our 12.9x leverage at the end of August to be too high, but omits here the further material point that we have been operating successfully and profitably with similar leverage for years, including during the 2008-09 financial meltdown."

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