Commitments, Contingencies and Guarantees

Commitments

The following table summarizes our commitments at November 30, 2016 (in millions):



	Expected Maturity Date (fiscal years)
	2017		2018		2019 and 2020		2021 and 2022		2023 and Later		Maximum Payout
Equity commitments (1)	$	0.8	$	8.6	$	11.3	$	—	$	234.0	$	254.7
Loan commitments (1)	304.6		11.9		71.6		44.0		—		432.1
Underwriting commitments	349.4		—		—		—		—		349.4
Forward starting reverse repos (2)	4,668.7		—		—		—		—		4,668.7
Forward starting repos (2)	2,539.2		—		—		—		—		2,539.2
Other unfunded commitments (1)	—		37.0		4.8		33.8		13.2		88.8
Total commitments	$	7,862.7	$	57.5	$	87.7	$	77.8	$	247.2	$	8,332.9


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


(2)	At November 30, 2016, $4,592.9 million within forward starting reverse repos and $2,464.6 million within 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 November 30, 2016, our outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds was $23.1 million.

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

Additionally, at November 30, 2016, we had other outstanding equity commitments to invest up to $1.6 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 November 30, 2016, we had $182.1 million of outstanding loan commitments to clients.

Loan commitments outstanding at November 30, 2016 also include our portion of the outstanding secured revolving credit facility provided to Jefferies Finance, to support loan underwritings by Jefferies Finance.

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.

Leases. As lessee, we lease certain premises and equipment under non-cancelable agreements expiring at various dates through 2039 which are operating leases. At November 30, 2016, future minimum aggregate annual lease payments under such leases (net of subleases) for fiscal years ended November 30, 2017 through 2021 and the aggregate amount thereafter, are as follows (in thousands):



Fiscal Year	Operating Leases
2017	$	61,226
2018	61,701
2019	59,364
2020	50,521
2021	48,429
Thereafter	564,077
Total	$	845,318

The total minimum rentals to be received in the future under non-cancelable subleases at November 30, 2016 was $17.6 million.

Rental expense, net of subleases, amounted to $56.1 million, $57.4 million and $57.4 million for the years ended November 30, 2016, 2015 and 2014, respectively.

During 2012, we entered into a master sale and leaseback agreement under which we sold and have leased back existing and additional new equipment supplied by the lessor. The transaction resulted in a gain of $2.0 million, which is being amortized into earnings in proportion to and is reflected net against the leased equipment. The lease may be terminated by us in the third quarter of fiscal 2017 for a termination cost of the present value of the remaining lease payments plus a residual value. If not terminated early, the lease term is approximately five years from the start of the supply of new and additional equipment, which commenced on various dates in 2013 and continued into 2015. At November 30, 2016, minimum future lease payments are as follows (in thousands):



Fiscal Year	Minimum Future Lease Payments
2017	$	3,798
2018	1,513
2019	189
Net minimum lease payments	5,500
Less amount representing interest	177
Present value of net minimum lease payments	$	5,323

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 November 30, 2016 (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	$	18,838.6	$	820.4	$	—	$	—	$	421.8	$	20,080.8
Written derivative contracts—credit related	—		52.2		24.6		360.8		—		437.6
Total derivative contracts	$	18,838.6	$	872.6	$	24.6	$	360.8	$	421.8	$	20,518.4

At November 30, 2016 the external credit ratings of the underlyings or referenced assets for our credit related derivatives contracts (in millions):



	External Credit Rating
	AAA/ Aaa		AA/Aa		A		BBB/ Baa		Below Investment Grade		Unrated		Notional/ Maximum Payout
Credit related derivative contracts:
Index credit default swaps	$	54.0	$	—	$	—	$	—	$	—	$	—	$	54.0
Single name credit default swaps	—		—		79.5		42.9		261.2		—		383.6

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 November 30, 2016, the fair value of derivative contracts meeting the definition of a guarantee is approximately $313.1 million.

Loan Guarantees. 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 $18.1 million at November 30, 2016. We have also provided a guarantee of a portion of Energy Partners I, LP’s obligations under a credit agreement. The maximum exposure to loss of the guarantee is $3.0 million at November 30, 2016. See Note 8, Variable Interest Entities for further information.

Standby Letters of Credit. At November 30, 2016, we provided guarantees to certain counterparties in the form of standby letters of credit in the amount of $33.3 million, which expire within two years. 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.