JEF has no balance sheet.. Why so high in levfin?
so their balance sheet is like US$ 50B which is tiny in the relative sense.
but they rank pretty high for levfin.
how does that work?
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JEF is not regulated like the other BBs given that it has a smaller BS. As a result, they can bring highly leveraged deals to market that JPM or Citi couldn't. In a sense, JEF can run a little wild with their lending practices (of course within reason).
but their tangible leverage ratio is 9.9x. JPM is 12.7x
(total assets - goodwill and intangibles)/shareholder equity
That’s irrelevant. Jefferies isn’t a bank. They don’t have depositors. And that’s not what leveraged deal is referring to. It refers to how much debt / ebitda is going on the actual business for that specific transaction
I am familiar with JEF so can provide some insight. They lend off of mass mutuals balance sheet in exchange for a % of the fees for committed deals. A lot of the hairy deals (which is their specialty) they do are best efforts too, so balance sheet size doesn’t matter and they keep 100% of those fees. Definitely a top 3 LevFin group on the street, especially for analysts since they have a separate syndication/capital markets group so they hold pen on lender model, investment rationale etc. deal sizes on average will be smaller than BofA types because of their inability to dish out large revolvers, but the deals definitely are the most complex and creative on the street, so it evens out in terms of junior learning experience. They were the first bank to bring credits to the market in the COVID environment with Landry’s / golden nugget and they did the $1.8b revlon restructuring. They did the first ever bond deal to finance a company buying Bitcoin with the proceeds (microstrategy). Absurd stuff. PE exits therefore are great too (primarily UMM, occasional MF depending on how you define it) and improving given how much the business has grown, even large HF placements are possible just by checking linkedin.
thanks for the info.
when you say their business has grown, could you elaborate on that? i can't find any news articles other than just their financials which are obviously great but this has been a boom for IBCM businesses. how will they fare when the market quietens down..?
I’m talking about fee market share for the levfin business. You’re unlikely to find recent articles on levfin league tables, plus because of the nature of the product, it’s actually extremely difficult to quantify which banks are “top” or not thru league tables since lots of banks like WF, Nomura will come in on the right side for commitments but not actually lead deals
I can kind of see why they are utilized so often by PE firms investing in HC services companies. Slim margins and essential services that can be levered up for growth/exiting with a strong return.
In addition to the brilliant comment above, they also recently signed a partnership with SMBC that’ll give them more access specifically for LevFin.
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