Jefferies is taking a $30 million pretax loss connected to the collapse of auto parts supplier First Brands, the investment bank disclosed Wednesday in its fiscal fourth-quarter earnings report.

The report spans September through November, so it’s the first quarterly update after First Brands declared bankruptcy Sept. 24.

Jefferies owns a 6% equity interest in the Point Bonita fund, which counted $715 million in exposure to First Brands. That figure comprises invoices from retailers such as Walmart and AutoZone that bought windshield wipers, oil filters and other auto parts from First Brands. 

Jefferies executives clarified that the bank’s actual exposure to First Brands amounted to about $45 million, according to an October letter to investors.

The $30 million loss reported Wednesday covers most of that.

“2025 … delivered serious disappointment with the fraud and bankruptcy of First Brands,” Jefferies CEO Rich Handler and President Brian Friedman wrote Wednesday in a letter accompanying the earnings report. “We take this situation very personally and deeply regret Point Bonita’s involvement in First Brands.”

The executives added they are “doing everything we can to protect the interests of our partners and to maximize Point Bonita’s recovery from First Brands and its wrongdoers.”

“There clearly are lessons to be learned, even from an idiosyncratic event such as this, and we will continue to adjust and improve our control regime across our firm,” Handler and Friedman wrote.

Jefferies’ earnings report comes as the First Brands drama plays out in court. The auto parts supplier’s founder, Patrick James, asked a New York federal judge Wednesday to order Jefferies to comply with a subpoena of documents, including internal communications and the due diligence records, connected to the bank’s investment in First Brands receivables.

Jefferies had earlier subpoenaed James in the interest of questioning him under oath.

The bank said Monday that it needed answers because James has “critical information” about the creation and sale of invoices, Bloomberg reported.

James, in turn, said Wednesday that Jefferies played a “central role” in the financing arrangements that are under scrutiny.

“Jefferies cannot simultaneously profit from these financing arrangements and then refuse to produce documents” that could clear him, James told the court.

The Securities and Exchange Commission is investigating disclosures Jefferies made to Point Bonita investors around the time of the bankruptcy.

James has also said a Jefferies deposition was unwarranted and potentially prejudicial, considering he was set to face questioning in the bankruptcy case and the federal probe. 

Turning the calendar

In an interview with Bloomberg on Wednesday, Friedman appeared ready to turn the calendar.

“All signs are that momentum will carry over into 2026, and absent a meaningful intervening event, 2026 should be a strong year of [mergers and acquisitions] and capital markets activity,” he told the publication.

Although net earnings at the bank dropped 7.2% year over year in the fiscal fourth quarter, to $191 million, Jefferies saw a jump in dealmaking and trading activity.

The bank notched its second-highest quarterly total of advisory revenue, $634 million. Meanwhile, equity and debt underwriting revenue climbed 77.7% and 25.8%, respectively.

In a figure that may foreshadow gains for other big banks – which are set to report fourth-quarter earnings next week – Jefferies saw its net revenue from investment banking surge by 20.4% year over year, to $1.19 billion.

First Brands, too, looked to put its past behind it.

The auto parts supplier has been negotiating with its lenders to raise money through a new loan, First Brands’ counsel, Sunny Singh, told a bankruptcy court in Houston on Wednesday, according to the Financial Times.

The company had $190 million in unrestricted cash that it could tap beginning this week, Singh said.

“We are at a critical juncture,” Singh said. “We are focused on negotiating a path out of Chapter 11 … through a sales process.”

Bankers at Lazard, whom First Brands hired to explore a sale of the business ahead of September’s bankruptcy, have reached out to potential buyers for some of the company’s business lines. 

The sales process could be finalized before the end of this month, Singh told the court.

Some assets, however, will see an “orderly wind down,” according to a presentation prepared for the court. 

An attorney representing some of First Brands’ creditors appeared less enthusiastic.

“Despite the best efforts of the [First Brands]’ advisers and professionals, the business has not seen the turnaround necessary,” attorney Ian Phillips wrote in a motion to the court this week. 

It remained uncertain whether the auto parts supplier could secure additional capital, Phillips said, adding it was “unclear whether there will be any funding for further investigation or litigation.”