First Brands Collapse Fallout Continues to Spread
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Anco wiper blades at an auto parts store in Memphis, Tennessee. First Brands Group Holdings has filed for Chapter 11 bankruptcy last month after weeks of turmoil sparked by creditor concern over the auto-suppliers use of opaque off-balance sheet financing.
Photographer: Houston Cofield/BloombergThe fallout from the implosion of First Brands keeps spreading. Morgan Stanley’s asset-management business asked to redeem some money it invested in a Jefferies Financial Group fund with large exposure to the bankrupt auto parts supplier’s trade debt. Point Bonita, a unit of Jefferies’ Leucadia Asset Management, had about a quarter of its $3 billion trade-finance portfolio invested in First Brands-related receivables.
A newly appointed company board committee is now investigating First Brand’s use of roughly $2.3 billion of off-balance-sheet financing, Chief Restructuring Officer Charles Moore said in a court filing. Some of the inventory backing these facilities “may have been commingled” with collateral securing a separate asset-backed loan facility. The Trump administration also opened an inquiry into the circumstances around First Brands’ collapse, which seems to have caught some Wall Street heavy-hitters by surprise.