NEW YORK ( TheStreet) -- Rating agency Egan Jones said brokerage firm Jefferies ( JEF) will need to raise capital and reduce leverage significantly to prevent a rating cut. 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. In a letter on Monday , Jefferies said markets were being "being misled by half-truths, false rumors and lies being disseminated with malice by a group whose interests are absolutely opposed to yours and ours," citing unnamed hedge funds behind the trouble. Jefferies also took a jab at Egan Jones in its 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." Shares of Jefferies were down 0.8% in Tuesday afternoon trading at $10.12. --Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: email@example.com.