First Brands Bankruptcy Sparks Investigation into $2.3 Billion Missing Assets

Financial Turmoil at First Brands: $10 Billion Liabilities Lead to Chapter 11 Filing

Sept 29, 2025 U.S. auto parts maker First Brands filed for bankruptcy on Monday. It has disclosed that it has liabilities exceeding $10 billion, marking the collapse of a company that has shocked debt collectors.

First Brand's will 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. 

Financial troubles at the auto parts supplier, coupled with bankruptcy of auto lender Tricolor Holdings, have shaken debt investors and created fears of broader stress in corporate debt markets, according to bondholders and bankruptcy experts.

The collapse of First Brands has raised concerns about potential ripple effects across the automotive parts industry, although experts say automaker supply chains are unlikely to be affected broadly since First Brands is primarily an aftermarket parts provider.

First Brand's Chapter 11 cases pertain solely to its U.S. operations and shouldn't affect its global operations. 

First Brands estimated liabilities are in the range of $10 billion to $50 billion, while its assets were estimated between $1 billion and $10 billion.

Bankers and creditors raced to restructure First Brand's debt as investors confidence in the company slowly took a downturn leading up to the filing. This is because several of its associated companies also declared bankruptcy.

Raistone Seeks Court Appointment of Independent Examiner in First Brands Bankruptcy

Oct. 8, 2025 Raistone - a trade finance company and a creditor of First Brands - asked a court on Wednesday, to appoint an independent examiner. It claims that as much as $2.3 billion "simply vanished" from the U.S. auto parts supplier.

After filing for bankruptcy protection last month, the company has had $11.6 billlion in total liabilities - according to court documents.

“Under these circumstances - with up to $2.3 billion in assets unaccounted for - the appointment of an examiner to conduct an independent investigation is both mandatory and is critical to maximizing recovery for creditors,” Raistone said in the filing to the Texas Southern Bankruptcy Court.

After First Brands filed for bankruptcy, it collected roughly $1.9 billion of factored receivables without remitting it to the proper owners - according to the filing.

Its attorney told Raistone in an email on October 2 that they didn't know if the company received $1.9 billion. 

After this, Raistone requested an independent investigator.

“First, do we know whether FBG actually received $1.9 billion (no matter what happened to it)? Raistone's lawyer said, according to an exhibit attached to the court filing. "Second, would you tell us how much is in the segregated accounts in respect of the factored receivables as of today?”

First Brands' lawyer responded with, "“#1 — We don’t know; #2 - $0”.

Raistone believes the investigation was "highly questionable," and raised doubts if the comittee will conduct an in-depth investigation

Leadership Shakeup at First Brands Group Amid Financial Uncertainty

Oct. 13, 2025 Patrick James - CEO of auto-parts maker First Brands Group - resigned from the company. 

Charles Moore - who will be replacing James as interim CEO - commented on James' resignation.

"Our immediate priority is to ensure stability and dependability for our employees, customers, and partners,” Moore said in the statement, Bloomberg reported. “We remain laser-focused on operational execution while we take the necessary steps to conduct an investigation into the past use of various financing instruments and facilitate a sale process designed to deliver the best possible outcome for our stakeholders.”

It is still unclear what went wrong with First Brands Finances, but its questionable finances started way before 2025. 

In 2011, a Fortress Investment Group filed a lawsuit against James, alleging he ran undercaptalized, overlapped entities. James settled that case and Wall Street continued to back him.

According to Seeking Alpha, the collapse of First Brands impacted a number of investment firms and lenders including Jefferies Financial Group, Western Alliance Bancorporation, and UBS Group.

Jefferies CEO Rich Handler: First Brands Group Defrauded Us

Oct. 17, 2025 Rich Handler, CEO of Jeffries Bank says they were defrauded by First Brands Group.

The collapse of First Brands lender and dealership Tricolor have unsettled Wall Street's credit market, which includes leverage loans, collateralized loan obligations, trade finance funds and subprime auto loans.

"I'm not saying there aren't other issues like this... I think there's a fight going on right now between the banks and direct lenders who each want to point fingers at each other and say, it's your fault, no, it's your fault," Handler told analysts and investors.

Jeffries' stock took a downturn after First Brands disclosed more than $10 billion in liabilities in bankruptcy filing at the end of September.

Brian Friedman, president of Jeffries said the fund caught up in First Brands is separate from its investment banking business.

"Kind of Chinese Wall 101. Nothing more to be said," Friedman said. "The two have absolutely no relationship and, in fact the decision in 2019 of the asset management Point Bonita team to engage with First Brands, was absolutely away from independent and disconnected from anything on the investment banking side."

Jeffries has said its exposure to First Brands is small and any potential loss is "really absorbable."

The bank has said the share reaction was overdone while disclosing that its Leucadia Asset Management fund holds about $715 million in receivables linked to First Brands.

First Brands Group Collapse Sparks Warnings Over CLO Market Stability

Oct. 20, 2025 The rapid growth of the market has led to quickly-made deals and a lack of due diligence, fund managers say after the collapse of First Brands Group.

Investors warn that the abrupt collapse of First Brands Group is an early sign of trouble for the market. 

First Brands was one of the largest issuers of loans bought by collateralised loan obligations (CLOs), investment vehicles that buy up small slices of hundreds of individual coporate loans.

CLOs are popular with big investors and insurers because they believe that by spreading their lending across different companies they are protected from the pains of only investing in a few businesses.

Unfortunately, the collapse of First Brands has raised concerns over the CLO market.  

"Inside credit markets for more than a year, there has been a grudging recognition that there was and is a series of credit problems that could be substantial and could be dangerous to the overall economy," said Andrew Milgram, chief investment officer of Marblegate Asset Management, a distressed-debt investor.

First Brands has issued more than $5 billion of senior and junior loans, which were bought and held in dozens of CLOs issued by asset managers including PGIM, Frankling Templeton, Blackstone, CIFC, Oaktree and Wellington, according to Morgan Stanley analysis.

Most of these vehicles have sold out their loans after realizing their losses. The loans are now being exchanged at just cents on the dollar, with an implied loss of more than $4 billion.

These losses will hit the returns of CLO equity holders which includes the managers of the structured credit themselves. CLOs are often 10 times leveraged. Defaults such as First Brands' cut into that equitty cusion, which exists to take the first loss and protect higher-rated investment grade tranches of the CLO.

"The two successive defaults of [First Brands] and Tricolor Auto brought into highlight potential irregularities and underwriting challenges in the credit market," Bank of America strategist Pratik Gupta said. "The market has started to take a dim view of credit fundamentals."