First Brands and Tricolor Are Signs of What’s to Come
The two companies’ debt troubles show what investors should be worried about in subprime and private credit.
A Tricolor dealership in Arizona after the used car seller filed to liquidate in bankruptcy.
Photographer: Bloomberg/BloombergInvestors in subprime consumer debt are rightly getting twitchy. Sticky inflation is hurting low-income families while the job market is starting to soften. But the losses that result will likely be more contained and cause far less damage to banks than the last subprime blowup, which almost brought down the global financial system.
Two companies have stoked worries about credit this month: Auto-loan specialist Tricolor Holdings and car-parts supplier First Brands Group. The first filed for bankruptcy liquidation abruptly amid fraud allegations this month, and the second filed for Chapter 11 protection on Sunday, according to Bloomberg News. Their stories are quite different.