First Brands’ Sudden Collapse Shocks Wall Street, Puts Billions at Risk

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

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Image Source: Jeenah Moon/Bloomberg

The rapid downfall of U.S. auto parts maker First Brands Group has stunned investors, marking one of the most striking corporate collapses in recent years. The company, which just weeks ago was pitching a $6 billion loan deal, filed for Chapter 11 bankruptcy protection on Sunday with more than $10 billion in liabilities.

First Brands’ unraveling is set to trigger heavy losses for some of the largest players in private debt markets. Collateralized loan obligations (CLOs), along with major asset managers including PGIM, CIFC, and Blackstone, were among those exposed. CLOs had purchased First Brands’ loans near face value, but the debt now trades at roughly 33 cents on the dollar. While some funds face steep losses, others who bet against the company’s debt are poised to gain.

The bankruptcy also marks a dramatic fall for Patrick James, the Malaysian-born industrialist who built First Brands into a multinational conglomerate through years of aggressive, debt-fueled acquisitions. James previously faced lawsuits during the 2008 financial crisis over alleged misrepresentations in financing deals, though those cases were later settled.

First Brands had been heavily reliant on opaque financing practices, including invoice factoring and inventory backed loans. At the end of 2024, the company disclosed $2.3 billion in factored customer invoices equivalent to more than 70% of its annual sales and nearly $700 million in supply chain finance. These financing methods, often hidden from balance sheets, raised investor concerns in recent months.

Jefferies, the Wall Street bank long associated with First Brands, is now facing scrutiny. The lender had been leading the company’s $6 billion refinancing deal before shelving it when investors demanded greater transparency. Jefferies itself is listed as an unsecured creditor in the bankruptcy filings, highlighting its exposure to the crisis.

The collapse underscores the growing risks in private credit markets, where companies have increasingly leaned on complex financing structures. Investors now face billions in potential losses, while questions mount over transparency and oversight in leveraged corporate lending.