Auto Parts Giant First Brands Files for $10 Billion Bankruptcy

Bankruptcy is not new in the U.S. auto sector, but the collapse of First Brands feels different. The company was once seen as a steady supplier of spare parts.

Now it has filed for bankruptcy in Texas, revealing debts that could shake Wall Street and ripple across the entire industry.

Indebted

First Brands admitted it owes more than $10 billion, reports El Economista. In contrast, its assets are worth no more than $10 billion, and possibly as little as $1 billion.

The gap is too large to close, and the company had no choice but to seek court protection on Sunday night.

One of the Biggest Collapses

This is one of the biggest collapses seen in the private debt market. Goldman Sachs had already warned the company was at extreme risk.

Many of its loans carried interest rates higher than 30 percent. Restructuring $6 billion might have saved it, but the effort failed.

The company had also relied heavily on a tactic called factoring. That means selling future income in exchange for quick cash. It created a snowball of debt that grew worse when Trump’s tariffs pushed the auto sector into crisis.

Not on the Balance Sheet

First Brands listed $5.9 billion in long-term debt earlier this year while holding only $1 billion in cash.

The true debt picture was much worse because factoring agreements did not appear on the balance sheet. Investors like Jefferies had bought into these deals and could now face huge losses.

Ran Out of Time

According to the Financial Times, the collapse accelerated when one of the investment vehicles holding company cash suddenly pulled back. That set off a rapid breakdown and destroyed confidence in the business.

The speed of the bankruptcy has surprised many observers. Large companies usually secure deals with lenders before filing, but First Brands ran out of time. Its creditors refused to lend more money without court protection

Will Restructure

For now, the company says it will keep running as it restructures. Chief Restructuring Officer Chuck Moore said the focus is on stabilizing operations, protecting jobs, and continuing to supply customers.

But this is already the second auto-sector bankruptcy this month, raising fears that First Brands may not be the last.

This article is made and published by Anna Hartz, which may have used AI in the preparation