Jan 16 - Fitch Ratings has assigned 'BBB' ratings to Jefferies Group, Inc.'s
(Jefferies) $600 million 5.125% senior unsecured notes due 2023 and $400
million 6.5% senior unsecured notes due 2043. The notes have been placed on
Rating Watch Negative, consistent with Jefferies' Long-Term Issuer Default
Rating. The proposed notes have been issued under Jefferies' shelf registration.
The $1 billion issuance will marginally increase Jefferies' pro forma leverage,
according to Fitch's estimates. Fitch believes this transaction will have a
relatively modest impact on the firm's credit profile. The proposed notes have
significantly longer maturities than Jefferies' outstanding unsecured notes, and
therefore have a positive impact on the company's debt maturity profile.
Approximately $250 million of the proceeds from the dual-tranche offering will
be used to pre-fund Jefferies' 5.875% senior notes due 2014 and approximately
$350 million of the proceeds to fund the required redemption of two series of
outstanding non-controlling membership interests in Jefferies High Yield
Holdings, LLC. The remaining $400 million will be used for general corporate
RATING DRIVERS AND SENSITIVITIES
Jefferies' ratings were placed on Rating Watch Negative on Nov. 12, 2012 in
connection with the company's planned merger with Leucadia National Corp.
(Leucadia). Fitch expects to downgrade Jefferies' ratings by one notch upon
consummation of the merger. This reflects Fitch's view that after the proposed
merger, Jefferies would become much more exposed to the market risk inherent in
the other subsidiaries' investments at Leucadia. Conversely, becoming a
privately-owned company may help insulate Jefferies from external market
pressures similar to those experienced in November 2011 For more information,
please see the press release titled 'Fitch Places Jefferies' 'BBB' L-T IDR on
Rating Watch Negative on Proposed Merger with Leucadia,' available at
Jefferies, a Delaware-incorporated holding company, is a well-established
full-service investment bank and institutional securities firm primarily serving
middle-market clients and investors. Its primary broker/dealer operating
subsidiary, Jefferies & Company, Inc., holds the vast majority of the firm's
consolidated assets and is regulated by the SEC. At Nov. 30, 2012, Jefferies had
U.S. GAAP total assets of $36.3 billion and shareholders' equity of $3.4 billion
(including non-controlling interests).
Fitch has assigned the following ratings:
Jefferies Group, Inc.
--$600 million 5.125% senior unsecured notes due 2023 'BBB'; Rating Watch
--$400 million 6.5% senior unsecured notes due 2043 'BBB'; Rating Watch