Has anyone taken a look at Jefferies business exposure to Chesapeake? It sort of sounds odd at first, but when you look at the numbers it is pretty clear that Jefferies has significant business relationships to Chesapeake and Aubrey McClendon. Last year Jefferies did about $55b in domestic M&A and 10% of that was Chesapeake related. I am not sure if any of this is priced into the stock, but it looks to me like the current troubles over at Chesapeake could lead to Aubrey being replaced as CEO. If that happens I would guess that it is likely that Jefferies' Ralph Eads and their O&G group will loose Chesapeake as a client. Imagine if 10% of a banks M&A volume and a significant amount of debt underwriting suddenly disappeared. Anyone have any idea what the impact would be on Jeffries in the short term or the long term?
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Yeah, they'll fall below Piper Jaffray in the league tables, tool.
They are really big in natural gas in general. I don't think it is specific to McClendon at CHK.
CHK's CFO, Nick Dell'osso, is an ex-Jefferies banker
Wouldnt hurt Jeffries, though Jefferies may lose some revenue. I think everyone in banking has known for about a decade that CHK has the Founder's Program (Aubrey having a 2.5% interest in every well), the firm is extremely bullish nat gas (impacted if prices go down), outspends its cash flow (what E&P company doesn't), and has VPPs (which are not debt and actually mean that the company sold production at a much higher rate relative to NYMEX today). The media is having a field day with their new found discovery.
The question is not if the bankers and the street were surprised, but if the constant sniping at Aubrey about jets, wells and a general lack of governance might cause the company to appoint a new CEO or possibly begin to limit the impact of Aubrey by replacing Eads (who just happens to have been Aubrey's fraternity brother and classmate at Duke) with another banker. Sure, Jefferies has a great energy practice, but for the last three years CHK has been 10% of firm wide M&A and 25% of their energy business.
If they do decide they need some fresh blood or if the board has to sell the company, Eads and Jefferies might be in a little bit of a tough spot. We are likely talking about $100m in fees.
I guess my joke was lost in translation. I cant read your post because I'm so distracted that you've misspelled Jefferies about 40 times
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