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You are here: Home / INDUSTRY NEWS / First Brands files for bankruptcy, revealing billions of dollars in liabilities
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First Brands files for bankruptcy, revealing billions of dollars in liabilities

30/09/2025

Summary

  • First Brands files for Chapter 11 bankruptcy protection
  • Company discloses liabilities ranging from $10 billion to $50 billion
  • First Brands lists assets between $1 billion and $10 billion in latest filing

NEW YORK, (Reuters) – U.S. auto parts maker First Brands filed for bankruptcy protection on Monday after disclosing liabilities exceeding $10 billion, marking the collapse of a company whose rapidly deteriorating finances have shocked debt investors in recent weeks.
First Brands is expected to soon disclose an issue with its factoring arrangements amounting to nearly $2 billion, according to people familiar with the matter. The company’s board and creditors are investigating the issue, one of these people said, confirming an earlier report in the Wall Street Journal. Factoring is a financing method that is tied to the future revenue of a company.
The company, whose fortunes unraveled in recent weeks as it grappled with a debt pile from a flurry of acquisitions over the past few years, has obtained $1.1 billion in debtor-in-possession financing from its first-lien lenders to support ongoing operations, it said in a statement.
Financial troubles at the auto parts supplier, coupled with the recent bankruptcy of subprime auto lender Tricolor Holdings, have rattled debt investors and stoked fears of broader stress in corporate debt markets, according to bondholders and bankruptcy experts.
The high-profile collapse of First Brands has raised questions among investors about potential ripple effects across the automotive parts industry, although experts said automaker supply chains are not likely to be affected broadly since First Brands is primarily an aftermarket parts provider.
Ohio-based First Brands, which is owned by businessman Patrick James, said that its Chapter 11 cases pertain solely to U.S. operations, and expects its global operations to continue uninterrupted. In its Chapter 11 petition, First Brands estimated liabilities in the range of $10 billion to $50 billion, while its assets were estimated at between $1 billion and $10 billion.
Bankers and creditors had been racing to restructure First Brands’ debt as investor confidence eroded leading up to the filing, with several of its associated companies also declaring bankruptcy.
Privately held First Brands, which makes replacement components including filters, brakes and lighting systems for the automotive aftermarket, emerged as a significant player in the industry through debt-financed acquisitions of rival auto parts makers.
Its well-known brands include Raybestos brake solutions, TRICO wiper blades, and FRAM filtration products.
Last week, ratings agency Fitch downgraded First Brands’ credit rating, saying the company’s options for managing its debt were increasingly limited to off-market solutions. Asset manager Apollo Global Management and investment firm Diameter Capital Partners had amassed a short position against the company’s debt earlier in September. Both firms have now closed their bets against First Brands’ loans.
HIGH-PROFILE COLLAPSE
Over the past week, First Brands’ loans plummeted in value as its bondholders braced for the group’s debt to be restructured.
Several Wall Street lenders and hedge funds, including Jefferies and Millennium, are exposed to First Brands’ supplier invoice-linked facilities.
More than a dozen companies affiliated with First Brands, including Carnaby Capital Holdings, filed for bankruptcy protection last week, according to court documents signed by First Brands’ owner and CEO, James.
The affiliated entities had secured loans that were backed by guarantees from First Brands, Reuters reported on Friday.
Carnaby Capital Holdings’ petition listed assets of over $500 million and liabilities exceeding $1 billion.
“We believe Carnaby was a material source of off-balance sheet financing that First Brands used to fund its working capital. Therefore, the loss of this short-term financing likely led to a significant liquidity shortfall at the company,” analysts at S&P Global said in a note on Monday. S&P downgraded First Brands’ credit rating following its bankruptcy filing.
In addition to its debt, the company has several billion dollars more in financing facilities that are tied to its customers and suppliers, Reuters has previously reported.
The latest filings reveal that First Brands and its related intermediaries had more than $8 billion of debt and inventory-backed financing. This figure is not linked to its customer and supplier invoices.
Some of the financial firms exposed to First Brands included UBS-backed hedge fund manager O’Connor; CIT Group, which is now owned by First Citizens Bancorp; Nomura; and SouthState Bank. They were among the 30 largest creditors, which had unsecured claims against First Brands, according to the filing. UBS and Nomura declined to comment, while First Citizens and SouthState did not respond to requests for comment.
Ryan O’Malley, head of portfolio management at Ducenta Squared Asset Management, said the cases of First Brands and the poor second-quarter results of used-car retailer CarMax had not sparked broader investor concerns over the asset-backed securities bond market.
However, he said, these two cases indicated some weakness in consumer auto spending, probably resulting from years of high interest rates.
Law firm Weil, Gotshal & Manges, investment bank Lazard, and consulting firm Alvarez & Marsal are advising First Brands on its bankruptcy proceedings. Gibson, Dunn & Crutcher and Evercore are advising the creditor group.
Reporting by Shivansh Tiwary and Shivani Tanna in Bengaluru; Additional reporting by Mike Spector, Davide Barbuscia and Anirban Sen in New York; Editing by Mrigank Dhaniwala, Megan Davies, Marguerita Choy and Matthew Lewis
Source: worldautoforum.com

Filed Under: INDUSTRY NEWS Tagged With: Source-17

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