The collapse of First Brands in 2025 sent ripples through the financial world, and the 9fin team has been following its journey since the first inkling of distress. 

We ran a webinar called The First Brands files: Factoring and the off-balance sheet void that devoured CLOs whole, to discuss this unfolding saga in detail. Our distressed team was joined by Robert Smith, corporate finance editor of the Financial Times.

Here are the five key points that spurred this discussion.

1. Journalists unveiled the early warning signs

The initial cracks in First Brands were publicized by enterprising reporters at the Financial Times and 9fin, demonstrating the power of a keen eye for unusual financial arrangements. The FT’s Smith in particular tapped his deep network of sources in the working capital world with whom he’s gained credibility over the course of award-winning reporting across the past decade. 

In First Brands' case, off-balance sheet financing, particularly involving invoices, raised red flags. It was a great example of how scrutinizing these arrangements can bring to light underlying issues of a company’s impending downfall.

2. Apollo’s short position had a ripple effect

Apollo's short position was initially viewed as industry gossip, but it gained significant traction once its basis in concerns about First Brands' viability became clearer. 

The result? A dramatic plummet in the term loan value. 

Market sentiment is one thing, but when it’s reinforced by credible reporting, it can accelerate a crisis and impact stakeholders. 

Check out our coverage summary on how 9fin kept clients informed on First Brands’ evolving situation.

3. 9fin experts demystified the complex web of stakeholders 

The company’s bankruptcy led to further clarity on First Brands’ complex web of stakeholders, from debtors to ad hoc groups, to SVP creditors and ABL lenders. 

Each party had its own interests at heart, which led to fierce disputes – the fight over the DIP financing, for example, revolved around dual-collateralization of inventory.

Getting to grips with these intricate relationships was an enjoyable aspect for 9fin reporters – and they’ll have their full attention on the eventual formation of a UCC. 

4. The slightest shift can drastically alter recoveries

The discussion on DIP financing brought to the forefront concerns around non-pro rata roll-ups and the potential for unequal treatment among lenders: super priority DIPs can offer significant recovery, but a slight shift in multiples can have a huge impact on recovery prospects for those not included in the roll-up. 

This underscores the need for careful analysis of waterfalls and potential recovery scenarios, especially when super senior tranches are involved.

Check out our analysis of First Brands’ $4.4bn DIP financing, in which we uncovered nuances and complexities that other media sources couldn’t. 

5. Transparency is a must in certain factoring agreements

The parallels between First Brands and the Lex Greensill scandal were stark, particularly concerning invoice factoring. 

The FT’s Robert Smith commented that sometimes the same collateral is pledged over and over again, and so-called ‘fresh air’ invoices can be especially problematic. 

The discussion highlighted the risks of related-party factoring, where sales and suppliers might not be legitimate, and the potential for value to "melt" when supply chains become overly financialized – a critical warning against the opacity and potential for fraud in certain factoring arrangements.

Stay up to speed on all things First Brands

First Brands’ situation isn’t over yet – and one thing’s for certain, 9fin’s team of reporters and analysts will be providing the story behind the story at every development.

From the initial red flags raised by investigative journalists, to the complex stakeholder battles in Chapter 11, and the profound impact of financialized supply chains, this case provides an in-depth glance at the challenges and risks in today’s distressed market.

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