Jefferies’ Point Bonita Capital fund is facing financial risk due to $715 million in unpaid invoices from collapsed global aftermarket auto parts supplier First Brands.
The company is also determining whether there were any potential irregularities related to its factoring arrangements—a type of financing where a firm sells its unpaid invoices to a third party at a discount in exchange for immediate cash.
One of the largest holders of First Brands accounts receivable is Point Bonita Capital, a trade finance fund managed by Leucadia Asset Management, a division of Jefferies. Point Bonita Capital oversees a $3 billion portfolio backed by $1.9 billion in equity.
Ohio-based First Brands ceased transferring funds in mid-September, prompting concerns among creditors.
According to bankruptcy filings, the company’s special advisers began probing whether unpaid invoices had been misdirected to other factoring firms—or sold multiple times.
Jefferies confirmed that it has yet to receive any information from the investigation.
“We are in communication with First Brands’ advisors and are working diligently to determine what the impact on Point Bonita might be. We intend to exert every effort to protect the interests and enforce the rights of Point Bonita and its investors,” Jefferies said.
Several other financial firms have been linked to First Brands, including Nomura, SouthState Bank, UBS-backed hedge fund manager O’Connor, and CIT Group, which is owned by First Citizens Bancorp.
In total, First Brands has $11.6 billion in liabilities, including $2.3 billion from factoring deals.
An ad hoc group of cross-holders—typically creditors or investors—agreed to provide First Brands with $1.1 billion in debtor-in-possession financing to continue business operations and complete customer orders.
Signs of Impending Doom
Trouble had been brewing shortly before First Brands declared bankruptcy.“The downgrade reflects Fitch’s view that the company’s options for addressing its debt have become increasingly limited to off-market options and it faces a higher risk of a distressed debt exchange or bankruptcy,” Fitch said in the note.
According to S&P Global, the bankruptcy of a key funding source also likely contributed to First Brands’ cash crunch.
Just days before First Brands filed for bankruptcy, its affiliate Carnaby Capital Holdings also sought Chapter 11 protection, reporting $500 million in assets against more than $1 billion in liabilities.
Additionally, two companies—investment firm Diameter Capital Partners and asset manager Apollo Global Management—put together a short position against First Brands’ debt early last month.