As the collapse of First Brands last month ripples through Wall Street and hits some of the largest US banks, there is one market that is also not immune to its deterioration: private credit.

According to a 9fin analysis of the BDC market, as many as 15 BDCs have exposure to the auto parts company (see below).

Over the last two years at least 20 BDCs have provided capital at some point to First Brands, either to the company’s first lien or junior credit facilities. Since then, five of these investment funds, including BDCs backed by Ares and Blue Owl, have exited their positions before the second quarter of 2025.

First Brands has been dominating the headlines since August after the US auto parts supplier botched its refinancing effort due to concerns swirl around its quality of earnings and degree of off-balance sheet financing. The company had $12bn of debt including corporate loans and off-balance sheet financing, which rattled Wall Street with its rapid descent into bankruptcy without a plan.

The vast majority of investment funds holding the company’s loans marked the credit instruments 90% or above, except for Great Elm Capital whose second-quarter mark on the junior credit was only half a point off (see below).

What’s clear, however, is that more than half of the BDCs invested in First Brands are privately held. They include big lenders such as Monroe Capital Income Plus, which held the largest credit investments in the BDC pack, totaling $60.1m as of June 2025.

Other BDCs with significant loan exposures to the auto parts supplier are Prospect Capital with $54.3m spread across First Brand instruments and FS Specialty Lending Fund with $26.6m in credit investments.

It’s also noteworthy that the BDCs demonstrated wide disparity in their assessment of First Brands credits for the quarter. For instance, Monroe Capital Income Plus Corporation marked the first lien debt where it held $47m as high as 101.25%. But Prospect Capital Corporation pegged the same senior instrument at 92.96%.

Out of stock

BDCs are already under pressure following the US Fed’s recent dovish move. Blackstone, for instance, cut the dividend for its non-traded BDC Blackstone Private Credit Fund (BCRED), and market participants see more adjustments to come.

Public BDCs are trading at a 20% median discount to NAV in light of First Brands’ disintegration, 9fin reported, raising concerns about the implications for private BDCs and whether mark-to-market issues will surface in private credit loans when they file their earnings reports for Q3.

In a list of 20 publicly-traded BDCs compiled by 9fin, 17 are trading at a discount to NAV, with the most pronounced being Prospect Capital Corp, one of the largest BDC’s to lend to First Brands.

Next month BDCs are set to report their earnings, including many of the 15 BDCs exposed to First Brands. It is unclear whether they held onto their investments throughout the period in the face of intensified scrutiny on the company’s off-balance-sheet liabilities.

For the publicly traded BDCs with exposure to First Brands, their share prices have also taken a hit over the past month. Great Elm Capital with $23.3m total credit investment in First Brands has lost more than a third of its value at Nasdaq.

Palmer Square Capital with only $10.8m in First Brands investments as of second quarter has also come under pressure, with the BDC’s share price falling by 6% since 15 September. NYSE-listed Saratoga Investment Corporation is down 8.4%, while Prospect Capital Corp and Phenixfin Corporation remained relatively flat.