And here is Egan-Jones again:
Synopsis: Unsustainable, in our opinion - JEF needs to raise equity (i.e., $1B) AND deleverage to reduce its 9.5+% LT yield. JEF's total debt to capital is 90.4% vs. 67% for IBKR, 62% for RJR and 43% for GFIG. GS and MS have ratios near 88% but they are significantly larger and should have some federal support via their banking charters. Furthermore, MF's freezing and shortchanging client funds have increased scrutiny of other medium-sized brokers. Raising $1B in new equity and reducing assets by $5B would reduce total debt to capital to only 86%. Email us for a more granular liq. analysis showing a 77% recovery for the sen. debt. Watch the recent rise in int. exp. relating to an acq. and the cost and avail. of funding. We will cut without a major deleveraging.