While Jefferies fights for its corporate life, Wall Street firms such as Oppenheimer and  Sandler O'Neill have come to the aid of the beleaguered firm.  It's difficult to figure how this will all end, because the damage to Jefferies has been enormous, the rumors demonizing, and investor fears are now well-intrenched. What Jefferies has faced since 10/31/11, when MF Global closed its business, are a continuous barrage of rumors and critical reports from rating agency Egan Jones, that, in part, have prompted rumors and co-called "half-lies."  Rating agency Egan Jone issued a report that was critical of the brokerage firm Jefferies Group - stock symbol JEF - saying it will need to raise $1bn in capital and reduce leverage significantly to prevent a rating cut.  Egan Jones noted that Jefferies has a total debt to capital ratio of 90.4%, which they claim is significantly higher than its closest peers.

e.g., Goldman Sachs and Morgan Stanley have similar ratios - near 88% - but they are significantly larger and have some federal support via their banking charters.

Egan Jones further goes on to say that, by raising $1 billion in equity and reducing assets by $5 billion, it will reduce Jefferies' total debt to capital to just 86% - a figure that the rating agency says is not good enough to prevent it (Egan Jones) from making further cuts to Jefferies credit rating.  Earlier this month, Egan Jones downgraded Jefferies' rating by a notch to BBB minus. Oppenheimer Critical of Egan Jones Conclusions. The battle between Oppenheimer and Egan Jones over Jefferies is on.  In its research report on Jefferies, Oppenheimer ridicules Egan Jones:  “Every analyst is entitled to his or her opinion, but one would think that one aspiring to become a significant rating agency would do a minimum of proof reading and fact checking before launching a highly controversial report." Oppenheimer also mocks this statement from the Egan Jones report:  "JEF has seen a decline of approximately 37.8% per annum over the last couple of years which is disappointing." Oppenheimer notes that the number used by Egan Jones is "just flat out wrong by a country mile,” and adds that the agency borders on the absurdity by saying "approximately" when it has drilled down to a tenth of a percent, while concurrently leaving "last couple of years" totally vague. Jefferies Battles Rumors About its Survival. Jefferies continues to battle demonizing rumors about its survival after MF Global filed for bankruptcy on 10/31/11.  The public, in part, has been impacted by Egan Jones' negative comments - including one that cites increased scrutiny on medium-sized brokers. Jefferies' management has been fighting back, through public statements and published letters that deny "unfounded" rumors and allegations about the firm and the impact of any exposure it may have to Europe.  In a letter issued Monday, Jefferies said markets were being "being misled by half-truths, false rumors and lies being disseminated with malice by a group [of unnamed hedge funds] whose interests are absolutely opposed to yours and ours." Jefferies also has poked jabs at Egan Jones, like this statement in that letter:  "We were both shocked and perversely amused when the analyst who first misled the public about our sovereign debt exposure being 77% of our shareholders' equity actually had the temerity to state on widely broadcast television that he omitted the material fact that we had almost equal and offsetting short sovereign debt positions because, and we quote, he had "space constraints." Jefferies took other action, reducing its debt holdings of Greece, Ireland, Italy, Portugal and Spain by an additional 50% after cutting its risk by about half earlier this month.  Egan Jones had cited large “sovereign obligations” relative to equity and a “changed environment” following the collapse of MF Global when it downgraded Jefferies this month. Sandler O'Neill analyst Jeff Harte had this to say on Jefferies and the Egan Jones report:  “We do not find Jefferies’s current 13:1 gross leverage overly concerning” because it’s in line with competitors such as Morgan Stanley and Goldman Sachs Group Inc.   Jefferies “appears to have sufficient liquidity.” Nevertheless, the situation remains serious - especially since all financial stocks are getting slammed - rumors or no rumors.  Since MF Global failed on 10/31/11, Jefferies has seen its shares fall over 20%, as investors speculated that Jefferies and other securities firms could collapse from losses tied to European sovereign debt. For further details, refer to: [benzinga  11/23/11] , [Bloomberg, 11/22/11]  and [The Street, 11/22/11].