US auto parts supplier files Chapter 11 bankruptcy; 'billions in debt'

First Brands Group, an American auto parts supplier, filed for Chapter 11 bankruptcy on September 25, 2025, through its entity Carnaby Capital Holdings, listing $1 billion-$10 billion in liabilities against $500 million-$1 billion in assets. This action follows the failure to refinance approximately $6 billion in debt, exacerbated by intense scrutiny over its use of poorly disclosed off-balance-sheet liabilities exceeding $4 billion, which obscured the company's true financial leverage from creditors. The company is now seeking a $1.25 billion debtor-in-possession loan to support operations during its restructuring process.

Analysis

First Brands Group (operating as Carnaby Capital Holdings) has filed for Chapter 11 bankruptcy protection, a move widely anticipated by the market following a failed attempt to refinance approximately $6 billion in debt. The filing reveals a severe imbalance, listing liabilities between $1 billion and $10 billion against assets of only $500 million to $1 billion. The core of the company's distress stems from its aggressive use of poorly disclosed off-balance-sheet financing, which is estimated to exceed $4 billion and obscured its true leverage from creditors. This lack of transparency was a key factor in the August 2025 halt of its refinancing efforts, as lenders demanded a Quality of Earnings report. The market had already priced in significant distress, with the company's senior loans trading as low as 32 cents on the dollar and prominent investors like Apollo Global Management purchasing credit-default swaps against its debt. Goldman Sachs analysts also publicly doubted the company's ability to avoid bankruptcy. To navigate the proceedings, First Brands has engaged restructuring advisors Lazard, Alvarez & Marsal, and Weil Gotshal & Manges, and is seeking a $1.25 billion debtor-in-possession loan, which will take precedence over existing debt.

Key Decisions for Investors

• Existing creditors of First Brands Group must prepare for significant haircuts on their holdings, as the planned $1.25 billion debtor-in-possession financing will subordinate their claims and the company's debt is already trading at deeply distressed levels.
• Investors should view this event as a positive catalyst for restructuring advisor Lazard (LAZ) due to its new mandate, and as a validation of the credit market expertise of Apollo (APO) and Goldman Sachs (GS), whose analyses correctly predicted the default.
• This case underscores the critical need to scrutinize the balance sheets of companies pursuing rapid, debt-fueled acquisition strategies, with a specific focus on identifying off-balance-sheet liabilities and complex financing arrangements that can conceal true credit risk.