• Jefferies booked a $30 million pretax loss tied to First Brands bankruptcy
• The exposure came through the Point Bonita fund’s receivables financing
• Executives cited fraud and pledged tighter internal controls
• Court battles are intensifying between Jefferies and First Brands founder
• The SEC is probing investor disclosures around the bankruptcy
• Jefferies reported strong advisory and underwriting growth
• Management expects capital markets momentum to extend into 2026
• First Brands is pursuing asset sales while negotiating new financing

Jefferies has taken a $30 million pretax loss linked to the collapse of auto parts supplier First Brands, the investment bank disclosed in its fiscal fourth quarter earnings report released Wednesday.

The reporting period runs from September through November, marking the first quarterly update since First Brands filed for bankruptcy on September 24.

The loss stems from Jefferies’ indirect exposure through its ownership of a 6 percent equity stake in the Point Bonita fund, which had $715 million in exposure to First Brands receivables.

Those receivables were tied to invoices issued to major retailers including Walmart and AutoZone for products such as windshield wipers and oil filters.

Jefferies executives have previously said the firm’s direct exposure was closer to $45 million, according to an October letter to investors. The $30 million charge disclosed this week accounts for the bulk of that amount.

“2025 delivered serious disappointment with the fraud and bankruptcy of First Brands,” Jefferies Chief Executive Rich Handler and President Brian Friedman said in a letter accompanying the earnings release. “We take this situation very personally and deeply regret Point Bonita’s involvement in First Brands.”

They added that the firm is “doing everything we can to protect the interests of our partners and to maximize Point Bonita’s recovery from First Brands and its wrongdoers,” while acknowledging that the episode has prompted a review of internal controls.

“There clearly are lessons to be learned, even from an idiosyncratic event such as this, and we will continue to adjust and improve our control regime across our firm,” the executives said.

The earnings disclosure comes as disputes surrounding First Brands continue to play out in court.

On Wednesday, First Brands founder Patrick James asked a federal judge in New York to compel Jefferies to comply with a subpoena seeking internal communications and due diligence materials related to the bank’s investment in the company’s receivables.

Jefferies has previously subpoenaed James, saying he holds “critical information” about how the invoices were created and sold, according to Bloomberg.

James has countered that Jefferies played a “central role” in the financing arrangements now under scrutiny.

“Jefferies cannot simultaneously profit from these financing arrangements and then refuse to produce documents” that could exonerate him, James told the court.

Separately, the Securities and Exchange Commission is investigating disclosures made to Point Bonita investors around the time of First Brands’ bankruptcy.

James has argued that a deposition sought by Jefferies would be unwarranted and potentially prejudicial given ongoing bankruptcy proceedings and the federal probe.

Despite the fallout, Jefferies signaled confidence in its broader outlook. In an interview with Bloomberg, Friedman said momentum in capital markets activity appears set to continue into next year.

“All signs are that momentum will carry over into 2026, and absent a meaningful intervening event, 2026 should be a strong year of mergers and acquisitions and capital markets activity,” he said.

While Jefferies’ net earnings fell 7.2 percent year over year in the quarter to $191 million, advisory and underwriting activity surged.

Advisory revenue reached $634 million, the firm’s second highest quarterly total, while equity and debt underwriting revenue rose 77.7 percent and 25.8 percent respectively.

Overall investment banking revenue climbed more than 20 percent to $1.19 billion.

First Brands is also seeking to move forward. The company is negotiating with lenders to secure new financing and has about $190 million in unrestricted cash available, its counsel told a bankruptcy court in Houston.

A sales process is underway for parts of the business, though some assets are expected to be wound down as creditor skepticism remains.