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First Brands Collapse and Concerns in the Credit Market

  • Jonas Eisman
  • Oct 26
  • 2 min read

On September 29, 2025, First Brands Group filed for Chapter 11 bankruptcy protection.

The Cleveland-based auto parts manufacturer now faces allegations of fraud, as the Justice Department has opened an inquiry into the collapse. The bankruptcy filings revealed that First Brands had engaged in large-scale invoice factoring and off-balance sheet debt arrangements. More broadly, the First Brands collapse shows a potential crack in credit markets, which has worried investors of firms in the company’s orbit. 

 

The U.S Department of Justice, though still early in the inquiry process, has not yet publicly indicated the presence of wrongdoing. However, with First Brands having over $11 billion in liabilities, and financial services firms Jefferies and UBS having a combined $1.2 billion tied to the company, the bankruptcy garnered significant attention.  

 

Jefferies played a large role in the financing of First Brands. One of its funds, Point Bonita Capital, held around $715 million in loans tied to the company. Specifically, Jefferies was helping refinance First Brands at the same time that one of its affiliated funds was buying First Brands’ invoices. The company structured the receivables transactions so that they wouldn’t count as debt, even though customer payments still flowed through its accounts. When lenders asked for a quality of earnings report, and it never materialized, uncertainty began to rise. Daily payments to the Jefferies fund stopped, and a variety of rumors began to spread. 

 

 Investors now worry that this bankruptcy may be the first of several hidden risks emerging, particularly in private credit and structured debt. As Jamie Dimon warned in reference to systemic credit risk, “When you see one cockroach, there are probably more.” The event has reminded markets how quickly confidence can fade when balance sheets prove weaker than expected. Analysts and investors are now watching closely to see if other leveraged companies reveal similar cracks in the coming weeks. 

 

Over the past month, Jefferies shares have fallen nearly 15%, with regional bank ETFs falling over 4%. The event has sparked widespread debate over whether we are currently in a private credit bubble, and encouraged further questions on lending standards. Ultimately, credit spreads on corporate debt remain tight, and investors are waiting on signals of broader weakness in credit markets. 

 

 

 

 

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