Jefferies Reveals $715 Million Exposure Linked to Bankrupt Auto Parts Maker First Brands

Jefferies Discloses Fund Hit in $715M First Brands Blow | Enterprise Wired
  • Source: seekingalpha.com

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Key Points:

  • Jefferies discloses fund: $715M tied to First Brands.
  • Retailer Receivables: Linked to Walmart, AutoZone, others.
  • Market Fallout: Bankruptcy sparks probe into invoice practices.

Investment bank Jefferies disclosed fund exposure Wednesday, revealing that its subsidiary, Point Bonita Capital, holds about $715 million in exposure connected to the bankruptcy of First Brands, a U.S.-based auto parts supplier. The disclosure sheds light on how trade financing arrangements between banks, suppliers, and retailers can become complex during corporate insolvencies.

According to Jefferies, the exposure represents nearly one-quarter of Point Bonita’s $3 billion trade finance portfolio, which is managed under Leucadia Asset Management, a division of Jefferies. The bank said roughly $113 million of Point Bonita’s $1.9 billion invested equity comes directly from Leucadia.

Invoices and Retailer Financing

Jefferies discloses fund exposure through Point Bonita’s financing activities with First Brands, which were primarily based on invoice factoring, a form of trade finance in which a company sells its invoices to a third party at a discount in exchange for immediate cash. In this case, repayment obligations were tied to major retailers, including Walmart, AutoZone, NAPA, O’Reilly Auto Parts, and Advance Auto Parts, that purchased First Brands’ products such as windshield wipers, spark plugs, and oil filters.

However, Jefferies disclosed that on September 15, First Brands stopped transferring payments from retailers to Point Bonita. Two weeks later, the supplier filed for Chapter 11 bankruptcy protection, following failed refinancing efforts and growing investor scrutiny of its debt position.

Investigation into Invoicing Practices

Court filings from First Brands suggest that advisers are investigating whether certain invoices were factored multiple times or whether they were properly transferred to third-party financiers like Point Bonita. Jefferies discloses fund exposure but said it has not yet received findings from that investigation but is actively coordinating with First Brands’ legal and financial teams to determine the potential impact.

In a statement, the investment bank said it “intends to exert every effort to protect the interests and enforce the rights of Point Bonita and its investors.”

Additional Jefferies and UBS Exposure

Jefferies also disclosed that another of its subsidiaries, Apex Credit Partners, held $48 million in loans to First Brands. Apex, a structured finance joint venture with MassMutual, manages these loans through 12 collateralized loan obligations (CLOs) and a separate financing facility.

Jefferies is not alone in its exposure to the bankrupt supplier. UBS, the Swiss banking group, reported over $500 million in exposure to First Brands’ debt, according to bankruptcy documents.

Market Reactions and Broader Context

The collapse of First Brands and its connections to major financial institutions follow Jefferies discloses fund exposure, prompting comparisons to past corporate failures involving supply-chain financing and leveraged investment structures. Industry analysts have drawn parallels to the Greensill Capital and Archegos Capital Management collapses, which disrupted major lenders and raised questions about risk oversight in complex financial networks.

Despite those comparisons, Jefferies emphasized that Point Bonita’s structure and exposure are different, noting that much of the financing relies on payments from retailers rather than the bankrupt supplier itself.

In its filings, Point Bonita is listed as an unsecured creditor with a “contingent, unliquidated, or disputed” claim, meaning repayment will depend on ongoing court proceedings and the outcome of the investigation into First Brands’ financial operations.

For now, Jefferies is working to assess potential losses and recoveries while maintaining investor confidence in its asset management and trade finance operations.

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