Jefferies pushes back on Western Alliance claims over receivables-backed loans

Jefferies Financial Group has pushed back against claims made by Western Alliance Bank regarding loans linked to receivables financing tied to the collapse of automotive supplier First Brands.

Western Alliance has filed a lawsuit seeking more than US$126mn, alleging breach of contract and fraud in connection with loans backed by receivables purchased from First Brands. The dispute centres on financing extended prior to the company’s bankruptcy, which has since raised wider concerns about risk in receivables-backed lending structures.

In response, Jefferies said the loans in question were made by Western Alliance to special purpose vehicles (SPVs) associated with its asset management business, rather than to Jefferies itself. According to the investment bank, the facilities were structured as non-recourse loans secured solely against receivables held by those entities.

Jefferies said it has no obligation to repay the loans beyond the assets of the SPVs, arguing that the agreements did not include guarantees or credit support from the parent company. The firm has described the claims as without merit and said it will defend the case.

The situation is linked to the collapse of First Brands, where lenders have alleged that receivables and other assets may have been pledged multiple times, exposing investors to losses. The case has become a focal point for concerns around underwriting standards, collateral verification and the use of structured vehicles in trade and receivables finance.

Industry participants say the dispute highlights the complexity of warehouse lending and securitisation structures, particularly where multiple parties are involved in originating, funding and servicing receivables.

As litigation continues, the outcome could have broader implications for how non-recourse receivables financing is structured and how risk is allocated between lenders, funds and intermediaries.