Western Alliance Bancorporation filed a lawsuit against Jefferies Financial Group alleging breach of contract and fraud. The legal action follows Jefferies' refusal to make a final $126.4 million payment on a loan. The dispute involves a loan collateralized by accounts receivable from First Brands Group, a bankrupt auto-parts supplier accused of widespread fraud.
Western Alliance charged off the full $126.4 million remaining loan balance in response to the missed payments. The bank intends to offset this loss through $50 million in securities gains. It also plans to implement $50 million in expense reductions to mitigate the financial impact.
Western Alliance shares dropped more than 7% in premarket trading following the news. Jefferies' stock price declined over 3% during the same period.