First Brands Group, a major U.S. auto parts maker known for brands such as FRAM and TRICO, filed for bankruptcy at the end of September 2025. The company had grown rapidly by borrowing heavily and using complex financing structures based on invoices and receivables.
Problems surfaced when lenders discovered that some of these receivables had been pledged more than once as collateral, and that billions of dollars in assets could not be fully accounted for. In mid-September, the company stopped passing payments to a trade-finance fund managed by Jefferies. That broke investor confidence and led to an immediate liquidity crisis.
The U.S. Department of Justice is now investigating possible financial irregularities, and creditors are seeking an independent audit to trace the missing assets.
Why it matters
While few mainstream funds hold direct exposure, this event raises concerns about the hidden risks in private credit and supply-chain finance. These forms of lending often operate with less transparency than traditional bank loans, making it harder for investors to know where the true risks lie.
The case is being compared to the Greensill Capital collapse in 2021 and may lead to tighter scrutiny of trade-finance funds and other non-bank lenders.
Key takeaways for investors
- No systemic risk: The situation is serious but contained. It is unlikely to threaten the broader financial system.
- Greater caution in private credit: Investors should expect tighter lending standards and slower inflows into trade-finance and receivables-based funds.
- Diversification remains key: Spread exposures across different sectors and financing styles to reduce concentration risk.
Background: The Greensill Collapse (2021)
The Greensill Capital collapse in 2021 provides important context for understanding the First Brands case.
What happened:
Greensill Capital was a UK-based finance firm that specialised in supply chain finance — paying suppliers upfront and collecting later from buyers. It then bundled these invoices into investment funds distributed mainly by Credit Suisse.
However, Greensill began financing anticipated future invoices (sales that had not yet occurred), blurring the line between short-term credit and speculative lending. When insurers withdrew coverage and investors questioned the quality of its receivables, the entire structure unravelled. Greensill filed for bankruptcy in March 2021, leaving Credit Suisse investors facing losses of up to US$5 billion.
Why it matters:
The collapse revealed how opaque financing structures can hide true credit risk. In both Greensill and First Brands, complex receivables arrangements made it difficult for lenders and investors to verify the underlying assets. Once confidence broke, liquidity evaporated almost overnight.
Parallel with First Brands:
Like Greensill, First Brands relied heavily on receivables-based funding. When lenders discovered missing or double-pledged invoices, it triggered a similar confidence crisis — but this time from the borrower side rather than the intermediary. Both cases show the danger of excessive leverage and limited transparency in private credit markets.