US investment bank Jefferies has fired back at Western Alliance over allegations of fraud and breach of contract tied to a $126 million loan related to the collapsed First Brands. Western Alliance, an Arizona-based regional bank, sued Jefferies last week claiming the Wall Street firm failed to repay a loan provided to a Jefferies-managed fund that financed the Ohio car parts distributor before its bankruptcy.

In a public letter, Jefferies CEO Rich Handler and President Brian Friedman called Western Alliance CEO Ken Vecchione's statements 'false and misleading.' They argued the bank made non-recourse loans to special purpose entities holding First Brands receivables, not direct loans to Jefferies. 'Jefferies honours all its obligations,' they wrote, disputing claims it couldn't repay the debt.

The dispute highlights the fallout from First Brands' collapse, which raised $12 billion in debt before inflicting billions in losses on lenders through alleged fraud. Jefferies also disclosed its exposure to failed British lender Market Financial Solutions, stating it had already recovered about 25% of a £103 million loan and expects minimal impact on earnings.