Jefferies’ Point Bonita Capital Faces $715 Million Risk After First Brands Bankruptcy

Jefferies’ Point Bonita Capital fund is confronting significant financial exposure following the collapse of global aftermarket auto parts supplier First Brands Group, which filed for Chapter 11 bankruptcy protection on September 29 in the U.S. Bankruptcy Court for the Southern District of Texas. The company cited overwhelming debt and a severe liquidity crunch as the main reasons for its downfall.

First Brands’ bankruptcy has left Point Bonita Capital grappling with $715 million in unpaid invoices, stemming from the fund’s long-standing factoring relationship with the auto parts maker. Factoring had been a crucial financing mechanism for First Brands. The trade finance fund, managed by Leucadia Asset Management, a division of Jefferies, oversees a $3 billion portfolio backed by $1.9 billion in equity. Since 2019, Point Bonita had purchased receivables tied to First Brands’ sales to major retailers such as AutoZone, O’Reilly Auto Parts, and Walmart.

According to Jefferies, Point Bonita had always been paid on time and in full—until mid-September, when First Brands abruptly stopped transferring payments. The disruption prompted alarm among creditors and sparked an investigation into possible irregularities in the company’s factoring arrangements, including whether certain invoices were misdirected or sold multiple times. Jefferies said it is working closely with First Brands’ advisers to determine the extent of the impact and pledged to “exert every effort to protect the interests and enforce the rights of Point Bonita and its investors.”

Court filings reveal that First Brands carries $11.6 billion in total liabilities, including $2.3 billion related to factoring agreements. Several other financial institutions, including Nomura, SouthState Bank, UBS-backed O’Connor, and CIT Group (a unit of First Citizens Bancorp), were also involved in similar financing arrangements. To stabilize operations, an ad hoc group of creditors has provided $1.1 billion in debtor-in-possession financing, enabling First Brands to continue serving customers and fulfilling orders during the restructuring process.

“Today’s actions mark an important step toward stabilizing First Brands’ operations and securing a long-term future for the company’s world-class portfolio of aftermarket automotive part brands,” said Chuck Moore, the company’s chief restructuring officer.

Trouble had been brewing long before the bankruptcy filing. On September 25, Fitch Ratings downgraded First Brands’ credit rating, citing rising refinancing risks and an unsustainable debt structure. Fitch later withdrew its ratings, noting insufficient information from the company. Earlier in the year, First Brands attempted to refinance $4.8 billion in debt due in 2027, aiming to extend maturities to 2030 and improve liquidity. The effort failed, leaving the company with limited options and pushing it closer to insolvency.

According to S&P Global, the bankruptcy of Carnaby Capital Holdings, a First Brands affiliate, also played a key role in the company’s financial collapse. Carnaby, which filed for Chapter 11 protection just days earlier, listed $500 million in assets and over $1 billion in liabilities. Analysts believe Carnaby served as a major source of off-balance-sheet financing that First Brands used to sustain operations. Its sudden loss likely triggered a significant liquidity shortfall.

Meanwhile, investment firms Diameter Capital Partners and Apollo Global Management reportedly established short positions against First Brands’ debt in early September, signaling that some market participants had already anticipated the company’s demise.

As the investigation continues, Jefferies’ Point Bonita Capital—and other financial institutions with exposure to First Brands—face mounting uncertainty over the recovery of hundreds of millions of dollars in receivables. The case underscores the fragility of complex trade-financing structures and the ripple effects that can emerge when a major player in the automotive supply chain collapses.

Source: NTD, The Epoch Times