The complaint, submitted on Wednesday in a New York state court, says Western Alliance seized a deposit account belonging to Point Bonita Capital, a Jefferies subsidiary under Acadia Asset Management that had financed First Brands' receivables.
Western Alliance earlier brought its own suit against Jefferies in March, alleging the investment bank defaulted on a loan secured by First Brands receivables and misled the bank into a refinancing deal. First Brands filed for Chapter 11 in September, and several of its executives have subsequently been indicted for allegedly fabricating or padding receivables.
Jefferies denies the accusations, asserting that it too was duped by the fraudulent scheme. "Western Alliance Bank has alleged - falsely - that the defendants somehow knew and had reason to know that First Brands was engaged in fraud," Jefferies stated in its Wednesday filing.
Point Bonita had roughly $715 million tied up in receivables from First Brands when the bankruptcy occurred, and the fund expects a minimal recovery. A portion of that exposure was used as collateral in a leveraged loan facility with Western Alliance, which has announced a $126 million write-down on that loan.
Jefferies claims that Western Alliance has argued that their deposit contract permits freezing the account while the litigation is ongoing. "That is demonstrably false." "Jefferies said Western Alliance was trying to get ahead of the court by" "grabbing assets to which it had no right."
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"A spokesperson for Western Alliance said in a Thursday statement": "We are confident in the merits of our case, will continue to take appropriate steps to protect the interests of the company and our stakeholders, and look forward to presenting the facts through the legal process."
Jefferies did not provide an immediate comment when contacted.
Federal prosecutors indicted four First Brands executives in connection with the fraud, including Patrick James, who founded the company, and his brother Edward. Both have entered not-guilty pleas. Two other former executives have admitted guilt, including ex-CFO Stephen Graham.
The Fight Over the Frozen Account
Western Alliance had lent money to Point Bonita using those same receivables as collateral. After First Brands failed, the bank says Jefferies' unit did not repay the loan. Jefferies refutes those allegations.
Jefferies says the freeze was illegal and a way for the bank to seize assets it had no right to. The bank previously sued Jefferies over the loan.
The lawsuit is titled Point Bonita Capital Master Fund A L.L.C. vs. Western Alliance Bank, filed in the New York State Supreme Court for New York County.
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