Research Update: Jefferies Finance LLC Outlook Revised To Negative On Increased Consolidated Leverage; 'BB-' Ratings Affirmed

Jefferies Finance LLC (JFIN) holding company JFIN Parent LLC reported a significant decline in adjusted total equity (ATE) in the second quarter of 2023, after taking possession of the bankrupt beauty company Forma Brands LLC (not rated). As a result, JFIN Parent's consolidated leverage, as measured by debt to ATE, was 6.6x as of May 31, 2023, above our downside threshold of 4.5x. We also expect macroeconomic conditions to weigh on the operating conditions and asset quality of commercial lenders like JFIN in the second half of 2023. Therefore, we revised our outlook on JFIN to negative from stable. At the same time we affirmed our 'BB-' issuer credit rating on the company. The negative outlook reflects the possibility that

...- Jefferies Finance LLC (JFIN) holding company JFIN Parent LLC reported a significant decline in adjusted total equity (ATE) in the second quarter of 2023, after taking possession of the bankrupt beauty company Forma Brands LLC (not rated). - As a result, JFIN Parent's consolidated leverage, as measured by debt to ATE, was 6.6x as of May 31, 2023, above our downside threshold of 4.5x. We also expect macroeconomic conditions to weigh on the operating conditions and asset quality of commercial lenders like JFIN in the second half of 2023. - Therefore, we revised our outlook on JFIN to negative from stable. At the same time we affirmed our '##-' issuer credit rating on the company. - The negative outlook reflects the possibility that we will lower the rating in the next 12 months if the company cannot make progress in reducing leverage toward or below 4.5x....

Research Update