First Brands Bankruptcy Unveils $866mn Supply Chain Finance Exposure

Shockwaves Through the Auto Parts Industry: First Brands’ Collapse

On September 28, 2025, the American auto parts giant First Brands Group filed for Chapter 11 bankruptcy protection, sending tremors through Wall Street and the global automotive supply chain. The company, known for distributing vital components like brake systems, wiper blades, and spark plugs to major US automotive retailers, now finds itself at the center of a high-stakes financial drama that has exposed the hidden risks of modern supply chain financing.

Debt ‘Ahead of Reality’: The Anatomy of a Crisis

For weeks, investors and lenders had watched with growing unease as First Brands’ off-balance sheet borrowing ballooned. According to court filings and reporting by GTR and Bloomberg, the group accumulated over US$866 million in supply chain finance debt across at least 12 creditors. The total liabilities declared in bankruptcy filings range between US$10 billion and US$50 billion, while assets are estimated at a maximum of US$10 billion.

Much of this debt was not immediately apparent to the public. Instead, it was embedded in complex instruments—inventory and invoice financing arrangements that allowed First Brands to keep critical suppliers paid, but also masked the company’s true financial exposure. As one industry observer noted, the firm’s debt had gotten ‘ahead of reality’—a warning sign that ultimately proved prescient.

The Web of Creditors and the Opaque World of Supply Chain Finance

The bankruptcy filing paints a picture of a tangled web of creditors, many of whom operate in the shadows of the non-bank financial world. Among the largest unsecured creditors are 1977 O’Connor (acquired by Cantor in May 2025, with US$116 million in claims), Kuwaiti asset manager Wafra (US$38 million), and Pemberton Capital Advisors (US$36.3 million). Other significant names include CIT Group (a First Citizens BancShares subsidiary, US$84.4 million), and Orbian, a London-based supply chain finance platform (US$20 million).

One particularly notable detail: a sales manager for working capital platform Raistone was listed as the contact for multiple exposures totaling US$667 million, while Raistone itself had an uncalculated and disputed claim through factoring arrangements. Meanwhile, Leucadia Asset Management (a Jefferies affiliate) was listed with undisclosed exposure, and LiquidX, a trade finance fintech, was linked to two claims worth a combined US$71 million—including US$24 million from Fasanara Capital.

Complicating matters further, at least one creditor—the UK-based Trade Finance Company, listed with a US$208 million claim—publicly denied any business dealings with First Brands, raising questions about the accuracy and transparency of the filings. Several other listed creditors were unreachable or could not be immediately identified, underscoring the opacity that often shrouds supply chain finance.

Bankruptcy Protection and the Fight for Survival

As liquidity dried up and lenders hesitated to provide new funding, First Brands’ options narrowed. The company ultimately secured US$1.1 billion in debtor-in-possession (DIP) financing—a lifeline that allows operations to continue during the bankruptcy process, according to statements cited by Bloomberg and Auto Finance News. Without court protection, creditors had been unwilling to risk further exposure, especially given the company’s reliance on short-term, often opaque, financing mechanisms.

For First Brands, the DIP financing is a bridge, not a solution. The bankruptcy process will force a reckoning over the company’s true financial health and the sustainability of its business model. It also opens the door to a broader industry conversation about the risks of supply chain finance and the need for greater transparency.

Lessons for the Industry: The Hidden Risks of Supply Chain Finance

The auto parts sector is notorious for its slow inventory turnover, making supply chain finance a popular tool for keeping suppliers paid and operations running smoothly. But as the First Brands saga demonstrates, such arrangements can conceal as much as they reveal. When lenders and investors lose faith, the house of cards can collapse with startling speed.

The bankruptcy has already prompted calls for closer scrutiny of off-balance sheet financing, particularly in sectors where such practices are widespread. With global supply chains still reeling from pandemic disruptions and inflationary pressures, the First Brands case is likely to serve as a cautionary tale for years to come.

As the dust settles, industry players, regulators, and investors alike will be left to ponder a sobering question: How many other companies are relying on financial structures that may not withstand the next shock?

The downfall of First Brands Group is a stark reminder that opacity in corporate finance—even in established industries—can mask systemic vulnerabilities. As supply chain finance becomes ever more integral to global commerce, transparency and robust oversight will be essential to prevent similar crises from erupting elsewhere.