Western Alliance Bancorp. in Phoenix has filed a lawsuit against Jefferies Financial Group and Leucadia Asset Management over $126.4 million in unpaid debt tied to bankrupt auto parts supplier First Brands.
Western Alliance said in a press release that it will record a full charge-off in the first quarter after Jefferies failed to make a $42.1 million payment that was due on Feb. 27.
The lawsuit, filed in the New York Supreme Court, alleges breach of contract and fraud. Western Alliance said defendants made payments from October 2025 through January 2026, but recently notified the bank that the remaining payments scheduled for the first quarter would not be made.
“While this counterparty’s failure to perform is disappointing, we remain fully focused on supporting our clients, driving performance, and reinforcing the trust this Company has earned over decades,” Kenneth Vecchione, Western Alliance’s president and CEO, said in the release.
“We have taken action in response to these unexpected events to minimize the impact this charge-off will have on our financial performance,” he added.
Jefferies, in a separate release, asserted that the lawsuit has no merit. The firm said that the loan, backed by receivables purchased from First Brands Group, was on market terms and non-recourse. The firm said Western Alliance conducted due diligence and was allowed to periodically audit the underlying receivables and other matters.
“Unfortunately, First Brands and its leadership perpetrated a wide-ranging and well-concealed fraud,” Jefferies said in the release. “We regret that the bank, as well as a range of lenders to and around First Brands, will suffer losses as a result of this fraud. “
To offset the impact, Western Alliance said it plans to realize $50 million in securities gains and cut $50 million in expenses that “do not impede growth or operational capacity.” Management said it is evaluating other actions to close the remaining $26 million gap.
Western Alliance said it still expects to post a profitable first quarter.