The sudden implosion of First Brands late last month has highlighted the growing risks associated with the opaque world of private financing. Warning signs, such as the owner’s reluctance to show his face on Zoom calls, resistance to providing invoices, late supplier payments, and whispers of off-the-books financing, were largely missed by those outside the company. First Brands operated with a level of secrecy that kept its methods, funding sources, and leadership largely unknown.
First Brands, an auto-parts supplier with a network of factories and distribution centres, has found itself owing over $US10 billion ($15.3 billion) to major Wall Street firms including Jefferies, UBS, and Millennium. The company is currently undergoing bankruptcy proceedings.
As the dust settles 11 days after First Brands declared bankruptcy, the full ramifications and the exact causes of the collapse remain unclear. However, a recent emergency court filing by one of First Brands’ financial partners has significantly heightened concerns. The filing calls for an independent investigation into $US2.3 billion that the partner claims has “simply vanished”.
The repercussions of First Brands’ failure are now spreading throughout the financial industry. The company provides auto-parts across a wide range of vehicles. This is triggering scrutiny of private financing practices and raising questions about due diligence in the investment sector.
