Exhibit 10
FOR IMMEDIATE RELEASE
JEFFERIES AND LEUCADIA AGREE TO INCREASE CAPITAL COMMITTED TO
HIGH YIELD, DISTRESSED AND SPECIAL SITUATIONS TRADING BUSINESS
NEW YORK, February 28, 2007 — Jefferies Group, Inc. today announced that it has
entered into an agreement with Leucadia National Corporation (“Leucadia”) to
expand and restructure the operation of its high yield secondary market business
into an entity to be called Jefferies High Yield Trading, LLC (“the Company”).
Background
In January 2000, Jefferies created three broker-dealer entities that employ a
trading and investment strategy substantially similar to that historically
employed by the Jefferies High Yield Division. Two of these funds, the Jefferies
Partners Opportunity Fund and the Jefferies Partners Opportunity Fund II, are
principally capitalized with equity contributions from institutional and high
net worth investors. Leucadia invested $100 million in Jefferies Partners
Opportunity Fund II. The third fund, Jefferies Employees Opportunity Fund (and
collectively with the two Jefferies Partners Opportunity Funds, referred to as
the “High Yield Funds”), is principally capitalized with equity investments from
Jefferies employees and is therefore consolidated into Jefferies’ consolidated
financial statements.
The High Yield Division and each of the High Yield Funds share gains or losses
on trading and investment activities of the High Yield Division on the basis of
a pre-established sharing arrangement related to the amount of capital each has
committed. The sharing arrangement is modified from time to time to reflect
changes in the respective amounts of committed capital. As of December 31, 2006,
on a combined basis, the High Yield Division had in excess of $1,024.8 million
of combined pari passu capital available (including unfunded commitments and
availability under the High Yield Funds revolving credit facility) to deploy and
execute the Division’s investment and trading strategy. The High Yield Funds are
overseen by Richard Handler, the Chief Executive Officer of Jefferies, in
combination with the long-standing team which runs the business on a day-to-day
basis.
The Agreement
Pursuant to the agreement, Leucadia and Jefferies (and its affiliates) will
increase their respective investments to $600 million. The investments will be
in a new holding company that will own the Company, to be called Jefferies High
Yield Holdings, LLC (“Holdings”). Holdings would provide for additional capital
investments from third party investors through a fund or funds to be managed by
Jefferies of up to $800 million in the aggregate over time. It is expected that
the Company will enter into a credit agreement that will provide for leverage on
a 1-1 basis, thereby providing potential total capital of up to $4 billion. The
term of the transaction is for six years from closing with an option to extend.
Jefferies and Leucadia will each have the right to nominate two of a total of
four directors to the Holdings’ board of directors, and each will own 50% of the
voting securities. Jefferies will

 

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transfer its high yield secondary market trading business to the Company, for
which Jefferies will receive additional securities entitling it to an additional
20% of the profits, and Jefferies will provide services to the Company for a fee
equal to 1.5% of contributed capital. Jefferies will receive a placement fee of
0.25% for the equity capital raised. Jefferies expects that it will receive a
management fee of 0.50%, in addition to the 1.5% fee for services described
above, for a total fee of 2%, from the third party investors.
The Company will be a registered broker-dealer engaged in the secondary sales
and trading of high yield securities and special situation securities, including
bank debt, post-reorganization equity, public and private equity, equity
derivatives, credit default swaps and other financial instruments. The Company
will commit capital to the market by making markets in high yield and distressed
securities and will invest in and provide research coverage on these types of
securities. The Company will be overseen by Richard Handler and the same
long-standing team that is currently responsible for this type of trading for
Jefferies and the High Yield Funds.
Under the provisions of FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities, Jefferies determined that the Company meets the definition of
a variable interest entity. Jefferies is deemed the primary beneficiary and will
consolidate the Company.
Commencement of the investment is subject to the receipt of regulatory approvals
and certain other conditions.
About Jefferies
Jefferies, a global investment bank and institutional securities firm, has
served growing and mid-sized companies and their investors for nearly 45 years.
Headquartered in New York, with more than 25 offices around the world, Jefferies
provides clients with capital markets and financial advisory services,
institutional brokerage, securities research and asset management. The firm is a
leading provider of trade execution in equity, high yield, convertible and
international securities for institutional investors and high net worth
individuals. Jefferies & Company, Inc. is the principal operating subsidiary of
Jefferies Group, Inc. (NYSE: JEF; www.jefferies.com).
Special Note on Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of the
safe harbor provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
include statements about our future and statements that are not historical
facts. The forward-looking statements in this release pertain to the future
development and expansion of our High Yield secondary market business.
Forward-looking statements represent only our belief regarding future events,
many of which by their nature are inherently uncertain. The use of these
forward-looking statements does not infer that the results will be achieved. It
is possible that the actual results may differ materially from the anticipated
results indicated in these forward-looking statements. Please refer to our
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 1, 2006 for a discussion of important factors that could cause actual
results to differ materially from those projected in these forward-looking
statements.
For further information, please contact:
Tom Tarrant, Jefferies & Company, Inc., 203-708-5989, ttarrant@Jefferies.com
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