Commitments, Contingencies and Guarantees

9 Months Ended

Aug. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies and Guarantees

Commitments

The following table summarizes our commitments at August 31, 2017 (in millions):



	Expected Maturity Date (fiscal years)
	2017		2018		2019 and 2020		2021 and 2022		2023 and Later		Maximum Payout
Equity commitments (1)	$	—	$	9.4	$	10.2	$	—	$	205.3	$	224.9
Loan commitments (1)	—		226.8		—		53.0		—		279.8
Mortgage-related and other purchase commitments	—		—		177.7		—		—		177.7
Underwriting commitments	70.0		—		—		—		—		70.0
Forward starting reverse repos (2)	3,943.7		—		—		—		—		3,943.7
Forward starting repos (2)	2,018.0		—		—		—		—		2,018.0
Other unfunded commitments (1)	45.0		154.5		130.6		226.2		12.1		568.4
Total commitments	$	6,076.7	$	390.7	$	318.5	$	279.2	$	217.4	$	7,282.5


(1)	Equity, loan and other unfunded commitments are presented by contractual maturity date. The amounts, however, are available on demand.


(2)	At August 31, 2017, all of the forward starting securities purchased under agreements to resell and securities sold under agreements to repurchase (collectively “repos”) settled within three business days.

Equity Commitments. Includes commitments to invest in our joint ventures, Jefferies Finance and Jefferies LoanCore, and commitments to invest in private equity funds and in Jefferies Capital Partners, LLC, the manager of the private equity funds, which consists of a team led by Brian P. Friedman, one of our directors and Chairman of the Executive Committee. At August 31, 2017, our outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds was $22.0 million.

See Note 9, Investments, for additional information regarding our investments in Jefferies Finance and Jefferies LoanCore.

Additionally, at August 31, 2017, we had other outstanding equity commitments to invest up to $1.5 million in various other investments.

Loan Commitments. From time to time we make commitments to extend credit to investment banking and other clients in loan syndication, acquisition finance and securities transactions and to SPE sponsors in connection with the funding of CLO and other asset-backed transactions. These commitments and any related drawdowns of these facilities typically have fixed maturity dates and are contingent on certain representations, warranties and contractual conditions applicable to the borrower. At August 31, 2017, we had $64.9 million of outstanding loan commitments to clients.

Loan commitments outstanding at August 31, 2017 also include our portion of the outstanding secured revolving credit facility provided to Jefferies Finance to support loan underwritings by Jefferies Finance. See Note 9, Investments, for additional information.

Mortgage-Related and Other Purchase Commitments. We enter into forward contracts to purchase mortgage participation certificates, mortgage-backed securities and consumer loans. The mortgage participation certificates evidence interests in mortgage loans insured by the Federal Housing Administration and the mortgage-backed securities are insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We frequently securitize the mortgage participation certificates and mortgage-backed securities. The fair value of mortgage-related and other purchase commitments recorded in our Consolidated Statements of Financial Condition was $44.5 million at August 31, 2017.

Underwriting Commitments. In connection with investment banking activities, we may from time to time provide underwriting commitments to our clients in connection with capital raising transactions.

Forward Starting Reverse Repos and Repos. We enter into commitments to take possession of securities with agreements to resell on a forward starting basis and to sell securities with agreements to repurchase on a forward starting basis that are primarily secured by U.S. government and agency securities.

Other Unfunded Commitments. Other unfunded commitments include obligations in the form of revolving notes to provide financing to asset-backed and CLO vehicles. Upon advancing funds, drawn amounts are collateralized by the assets of an entity.

Guarantees

Derivative Contracts. As a dealer, we make markets and trade in a variety of derivative instruments. Certain derivative contracts that we have entered into meet the accounting definition of a guarantee under U.S. GAAP, including credit default swaps, written foreign currency options and written equity put options. On certain of these contracts, such as written interest rate caps and foreign currency options, the maximum payout cannot be quantified since the increase in interest or foreign exchange rates are not contractually limited by the terms of the contract. As such, we have disclosed notional values as a measure of our maximum potential payout under these contracts.

The following table summarizes the notional amounts associated with our derivative contracts meeting the definition of a guarantee under U.S. GAAP at August 31, 2017 (in millions):



	Expected Maturity Date (fiscal years)
	2017		2018		2019 and 2020		2021 and 2022		2023 and Later		Notional/ Maximum Payout
Guarantee Type:
Derivative contracts—non-credit related	$	8,530.1	$	5,114.5	$	2,183.1	$	215.0	$	595.7	$	16,638.4
Written derivative contracts—credit related	—		41.4		10.0		279.8		—		331.2
Total derivative contracts	$	8,530.1	$	5,155.9	$	2,193.1	$	494.8	$	595.7	$	16,969.6

The derivative contracts deemed to meet the definition of a guarantee under U.S. GAAP are before consideration of hedging transactions and only reflect a partial or “one-sided” component of any risk exposure. Written equity options and written credit default swaps are often executed in a strategy that is in tandem with long cash instruments (e.g., equity and debt securities). We substantially mitigate our exposure to market risk on these contracts through hedges, such as other derivative contracts and/or cash instruments, and we manage the risk associated with these contracts in the context of our overall risk management framework. We believe notional amounts overstate our expected payout and that fair value of these contracts is a more relevant measure of our obligations. At August 31, 2017, the fair value of derivative contracts meeting the definition of a guarantee is approximately $245.5 million.

Loan Guarantee. We have provided a guarantee to Jefferies Finance that matures in January 2021, whereby we are required to make certain payments to an SPE sponsored by Jefferies Finance in the event that Jefferies Finance is unable to meet its obligations to the SPE. The maximum amount payable under the guarantee is $0.2 million at August 31, 2017.

Standby Letters of Credit. At August 31, 2017, we provided guarantees to certain counterparties in the form of standby letters of credit in the amount of $54.0 million, which have a weighted average maturity of less than one year. Standby letters of credit commit us to make payment to the beneficiary if the guaranteed party fails to fulfill its obligation under a contractual arrangement with that beneficiary. Since commitments associated with these collateral instruments may expire unused, the amount shown does not necessarily reflect the actual future cash funding requirement.

Other Guarantees. We are members of various exchanges and clearing houses. In the normal course of business we provide guarantees to securities clearinghouses and exchanges. These guarantees generally are required under the standard membership agreements, such that members are required to guarantee the performance of other members. Additionally, if a member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearinghouses often require members to post collateral. Our obligations under such guarantees could exceed the collateral amounts posted. Our maximum potential liability under these arrangements cannot be quantified; however, the potential for us to be required to make payments under such guarantees is deemed remote. Accordingly, no liability has been recognized for these arrangements.