This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. Investment bank Jefferies disclosed Wednesday that one of its credit funds has roughly $715 million in exposure linked to bankrupt auto parts supplier First Brands. The exposure represents nearly a quarter of a $3 billion trade finance portfolio managed by Point Bonita Capital, a subsidiary of Jefferies’ Leucadia Asset Management. Not all of the exposure is carried o ...

The Goldman Sachs headquarters in New York. Analysts on a Goldman Sachs Group Inc. trading desk have told clients they have “serious doubts” that the auto-parts supplier First Brands Group will be able to avoid bankruptcy. Most Read from Bloomberg In a note on Wednesday morning, the analysts expressed concern about First Brands’ financing arrangements, some of which carry interest rates north of 30%, according to a copy of the message seen by Bloomberg. The analysts wrote that their research was based on ...

Core Viewpoint - First Brands Group is facing significant financial distress, with creditors experiencing billions in paper losses due to concerns over the company's off-balance sheet financing and lack of communication, leading to a drastic decline in the value of its debt [1][2][3]. Group 1: Financial Distress and Debt Issues - First Brands has approximately $6 billion in debt, with a $2 billion loan due in 2027 that has fallen to under 50 cents on the dollar from over 90 cents in just over a week [7][13]. - The company's riskier junior loans have plummeted below 20 cents, indicating severe market distress [7]. - Concerns about the company's financial practices, particularly its reliance on factoring for 70% of its revenues, have raised alarms among investors [11][12]. Group 2: Market Reactions and Investor Sentiment - Investors have reacted by selling loans to mitigate losses, and some have organized for potential restructuring [3][4]. - Apollo Global Management and Diameter Capital Partners have closed out their short bets against First Brands, reflecting a significant shift in market sentiment [6]. - The situation has drawn parallels to other recent credit market disruptions, highlighting broader concerns about opaque financing arrangements [5]. Group 3: Company Background and Ownership - First Brands, owned by Patrick James, has expanded through debt-funded acquisitions, primarily selling auto parts through major retailers [8]. - The company has been under scrutiny since pausing a proposed debt refinancing in August, prompting calls for a quality of earnings report [9][10]. - Fitch Ratings has rated First Brands at B, indicating a junk status, and noted the challenges posed by the large sum of debt maturing in 2027 [13][14].