When $11.6 billion vanishes in a matter of weeks, Wall Street sits up and takes notice. That's the fallout from First Brands, the Rochester, Michigan-based auto parts supplier whose bankruptcy has become a cautionary tale of opaque financing, missing payments, and potential fraud.
Lenders, investors, and even major banks suddenly found themselves holding the short end of a massively leveraged bet gone wrong. And it gets worse: Multi-billion-dollar debts, questionable accounting practices, and potentially double-counted receivables have exposed the hidden risks of private credit markets.
Firms like Jefferies Financial Group (NYSE:JEF) and UBS (NYSE:UBS), along with hedge funds and investors, are now grappling with losses, litigation risk, and reputational fallout — all while asking how a company marketed as a "$6 billion loan opportunity" could implode so spectacularly. Let’s break it down.
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What's Happening With First Brands?
First Brands, originally known as Crowne Group, filed for bankruptcy protection in September after lenders raised alarms over irregular financial reporting. What they found was far worse than anyone expected.
Court filings show $11.6 billion in liabilities, but investigators have since uncovered billions more in hidden debt tied to off-balance sheet financing structures that escaped disclosure under U.S. accounting rules.
First Brands' books revealed:
- $2.3 billion in factoring facilities
- $682 million in supply chain finance (SCF), and
- Over $8 billion in related-party inventory-backed loans.
What Did It Buy?
For over a decade, the company built a portfolio of brands (i.e., Raybestos brakes) by relying heavily on private credit markets to fund an aggressive acquisition spree.
- 2014: As Crowne, it bought Trico Products Corp. from private equity firm Kohlberg & Company LLC.
- 2019: Trico subsequently purchased Fram filters and Autolite spark plugs from The Rank Group.
- 2020: It took over Brake Parts Inc. and Champion Laboratories Inc, Brake Parts Inc. and Champion Laboratories
- 2023: It picked up Horizon Global Corporation, a manufacturer of towing, trailering, and cargo management products.UCI Performance Pump Business.
Why Does It Matter?
First Brands is one of the largest corporate bankruptcies in 2025. The first six months of the year saw the highest total number of bankruptcies since 2010, per S&P Global.
This particular collapse is more than a corporate cautionary tale — it's a spotlight on systemic risk. Investors thought they were buying into safe loans, but shady refinancing masked vulnerabilities. But behind its apparent $6 billion debt load lay a web of invoice-based financing that investors — and regulators — underestimated.
Investigators are now examining whether First Brands pledged the same invoices multiple times, a practice that would amount to double-counting. In other words, lenders were unaware that their loan was secured by an asset that's already been pledged elsewhere. This could ultimately trigger a catastrophic failure of internal financial controls.
Who's Involved?
- Jefferies’ subsidiary, Point Bonita Capital, had $715 million in exposure. Jefferies also pitched the company as a $6 billion opportunity with $1 billion in cash, yet within weeks, senior loans were trading at just 33 cents on the dollar.
- UBS faces over $500 million in exposure (30%) mostly through Raistone, a fintech platform founded by former Greensill Capital employees. In 2021, Greensill collapsed, hurting Credit Suisse, which was later taken over by UBS.
- Walmart (NYSE:WMT) and AutoZone (NYSE:AZO) — both retailers’ receivables are tied up in First Brands' loans. Their payments reportedly ceased in mid-September.
- First Brands CEO Patrick James, who previously faced (and dismissed) fraud allegations, is again under scrutiny.
What’s The Market Reaction?
The fallout has been severe across global credit markets.
Jefferies' stock fell 7.8% at one point, and analysts warn that regulatory fines, litigation, and reputational damage could magnify losses far beyond the immediate financial exposure.
The bankruptcy also underscores how accounting "disclosures" can mask more than they reveal. Financial Accounting Standards Board (FASB) rules require companies to note supply chain finance obligations. However, they don't require reclassifying those debts as financial liabilities, which can cloud disclosures.
As a result, opacity thrives.
What Happens Next?
Banks, funds, and investors exposed to First Brands could face additional losses. No doubt litigation and regulatory action will drag on. Observers note that the fallout could reshape what investors once deemed “safe.”
If hedge fund manager Jim Chanos is correct, First Brands exemplifies the deep cracks in private credit markets.
The famed short seller even likened it to the packaging of subprime mortgages, which contributed to the 2008 crisis. In the Financial Times, Chanos blamed the "layers of people between the source of the money and the use of the money.”
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