the request for judicial recovery of one of the largest auto parts suppliers in the USA, First Brands Group LLC.
/ TLDR - Here's how the FT summarized the situation with the main players who can dance:
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Jefferies: earned undisclosed fees on the financing it provided to First Brands
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A fund at UBS O'Connor holds 30% exposure linked to First Brands
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A Jefferies fund has US$715 million of exposure to First Brands' invoices
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Singer Fitzgerald is trying to rework its deal to buy O'Connor from UBS after the fiasco
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Western Alliance: has exposure to the auto parts maker through leverage facilities it provided to Jefferies
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BlackRock is trying to rescue its money from the Jefferies fund in question
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A major First Brands creditor claims that up to $2.3 billion "simply disappeared"
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A joint venture between Japan's Norinchukin Bank and Mitsui & Co. faces $1.75 billion in exposure linked to First Brands
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Insurers like Allianz are bracing for a wave of potential claims related to First Brands
Other companies have recently filed for bankruptcy in situations similar to First Brands, involving high debt in private credit, shadow banking, opaque financing and risks in the unregulated credit sector, such as Tricolor Holdings.
Tricolor, based in Texas, operates subprime used vehicle financing and primarily serves immigrants and low-income buyers. It filed for Chapter 11 on September 10 of this year, with debts estimated in the billions, including losses to banks like JP Morgan Chase and Fifth Third (which accused it of fraud).
Very similar to First Brands: reliance on off-balance-sheet private debt, aggressive growth through private credit lending, and rapid collapse due to economic pressures (such as tariffs and falling consumption). This all exposes the risks of shadow banking, with interconnections between banks and private funds. Both companies are involved in the automotive ecosystem, with "invisible" debts that caught investors by surprise and should serve as a warning in a world of private credit that now reaches trillions.
Now look at this: Carnaby Capital Holdings, LLC is another special-purpose financing vehicle group linked to First Brands Group. It primarily operates in financial transactions such as invoice factoring (accounts receivable financing) and opaque loans, which helped conceal First Brands' billion-dollar debt.
These vehicles were created to support First Brands' acquisitions and operations, transforming it into a "disguised financial operation." Patrick James, owner of First Brands, is listed as president and CEO of several Carnaby units. Strange, isn't it? Search for him online, and even in today's connected world, you won't find his picture easily.
This already happened in the subprime crisis that led to the crash of 2007-2008.