Jefferies, which two days ago denied, denied, denied, has been forced to release another statement, 48 short hours later. As usual, the excuse used is the "Net exposure" is just $38 million compared to gross of $2.7 billion, a generic claim which was summarily debunked in our previous post.
NEW YORK & LONDON -- November 03, 2011
In response to information published today, Jefferies clarified information relating to its sovereign-debt positions and its interest-income expense.
To be clear, as of August 31, 2011, Jefferies had no meaningful net exposure to European sovereign debt. Recent reports and calculations appear to have been focusing only on long inventory of $2.684 billion but not taking into account the fact that there were offsetting short positions in such sovereign debt of $2.545 billion as well as offsetting positions in futures instruments.
It should be noted that, as of today’s opening of business, Jefferies’ net exposure to the sovereign debt of the nations of Portugal, Italy, Ireland, Greece, and Spain consisted of the following (rounded to the nearest million):
Portugal $5 million
Ireland $28 million
Italy $104 million
Greece $3 million
Spain <$178 million>
That combined net short exposure of approximately $38 million equals approximately 1% of Jefferies’ shareholders’ equity, which as previously reported is not meaningful to Jefferies’ shareholder equity. As Jefferies has previously stated, to the extent Jefferies from time to time takes positions in such debt, they are short term in nature, are recorded in the trading book of Jefferies' regulated UK broker-dealer, are marked to market daily, and fluctuate depending upon customer demand, auction activity, and opportunities in the market place.
With respect to interest-income expense, Jefferies carries interest-earnings investments that turn over rapidly with its funding. As a result, Jefferies has had significant interest income in the past and should continue to have it in the future.
Jefferies Group, Inc. (NYSE: JEF) is the global investment banking firm focused on serving clients for nearly 50 years. The firm is a leader in providing insight, expertise and execution to investors, companies and governments, and provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income and commodities, in the U.S., Europe and Asia.
Jefferies Group, Inc.
Peregrine C. Broadbent, 212-284-2338
Chief Financial Officer