Western Alliance sues Jefferies for 126 million payment

Western Alliance has filed a lawsuit against Jefferies Financial after the conglomerate informed the bank it would not fulfill a $126.4 million payment. The payment was due under a forbearance agreement involving First Brands Group, a bankrupt automotive parts supplier. In the United States, the complaint was filed in the New York Supreme Court, alleging breach of contract and fraud related to a commercial loan. The legal action follows a period of financial instability for the entities involved. Shares of Jefferies fell by more than 3%, while Western Alliance shares declined by over 4.6% in pre-market trading. The dispute involves a loan collateralized by accounts receivable purchased from First Brands Group, which reportedly owed the asset management arm of Jefferies approximately $715 million. A forbearance agreement serves as a temporary arrangement where a lender agrees to reduce or delay payments for a specific period instead of forcing a loan into default. This specific agreement has come under scrutiny as investors also pursue legal action against Jefferies, alleging they were defrauded into investing in a fund linked to the now-bankrupt supplier.