New York, November 01, 2022 -- Moody's Investors Service ("Moody's") has affirmed the long-term debt ratings of Jefferies Financial Group Inc. (JEF, senior debt at Baa2). This follows the consummation [1] of the merger of JEF with its wholly-owned subsidiary Jefferies Group LLC (Jefferies Group). JEF, as the surviving legal entity, has assumed all of Jefferies Group's outstanding debt. Since Jefferies Group has been merged into JEF, with JEF as the surviving entity, Jefferies Group's issuer (formerly Baa2) and program ratings have been withdrawn as a result of the reorganization. The rating outlook on JEF remains stable.
RATINGS RATIONALE
Moody's said this legal entity reorganization is consistent with JEF's long standing strategy to simplify its operations, liquidate its merchant banking portfolio and focus on its core investment banking, capital markets and asset management capabilities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings of JEF could be upgraded if its business model continues to evolve and earnings become less dependent on the capital markets cycle and more stable over time - through a shift to a more granular risk profile and through the development of a substantial recurring earnings stream of low capital intensity. Additionally, given the importance to the firm's creditworthiness of the consistent governance practices and contributions from its CEO and its President, an upgrade would likely be dependent upon clarity on the firm's longer-term leadership structure, and there being a strong demonstration that its culture and strategic and financial policies would be sustained after a leadership transition.
The ratings of JEF could be downgraded if losses indicative of risk control failures occur, or if it should engage in concentrated risk-taking or relaxes its leverage and liquidity policies.
The principal methodology used in these ratings was Securities Industry Market Makers Methodology published in November 2019 and available at https://ratings.moodys.com/api/rmc-documents/65549. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Affirmations:
..Issuer: Jefferies Financial Group Inc.
....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2
..Issuer: Jefferies Group LLC
....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2 (Assumed by Jefferies Financial Group Inc.)
Withdrawals:
..Issuer: Jefferies Group LLC
.... Issuer Rating, Withdrawn , previously rated Baa2
....Senior Unsecured Medium-Term Note Program, Withdrawn , previously rated (P)Baa2
....Senior Unecured Shelf, Withdrawn , previously rated (P)Baa2
Outlook Actions:
..Issuer: Jefferies Financial Group Inc.
....Outlook, Remains Stable
..Issuer: Jefferies Group LLC
....Outlook, Changed To No Outlook From Stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
REFERENCES/CITATIONS
[1] Form 8-K (SEC) 1-November-2022
Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Peter E. Nerby
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Donald Robertson
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653