First Brands: why a maker of spark plugs and wiper blades has Wall Street worried

"Financial problems at the maker of spark plugs, wiper blades, brake calipers, brake shoes, tow hitches and motor oil has caused intense anxiety on Wall Street in recent weeks. Car parts are not usually something that causes finance chiefs to lose much sleep. But the potentially multi-billion dollar financial crisis surrounding First Brands has them rattled. As ever in finance, it's what investors don't know that scares the most, and with First Brands, there appears to be plenty."

"Starting life as Ohio-based Crowne Group, James acquired Trico, best known for windshield wipers, and went on a debt-fueled acquisitions spree, snapping up auto-focused parts makers. James rechristening the company as First Brands Group in 2020. It now owns 24 automotive-related companies, according to the group's website. If your car is 10 years old, odds are good that parts from these companies are already on there, notes the auto website CarBuzz."

First Brands expanded through debt-fueled acquisitions under Patrick James, acquiring 24 automotive-related companies including Trico. The group supplied aftermarket parts such as spark plugs, wipers, brake components, tow hitches, and motor oil, often at lower cost than dealership original equipment. The company relied heavily on opaque off-balance-sheet financing and factoring, borrowing against invoices through private debt and shadow banking to keep liabilities hidden. First Brands filed for bankruptcy protection in the southern district of Texas on 29 September, listing liabilities of $10bn–$50bn against assets of $1bn–$10bn and employing about 26,000 people. The rapid collapse has unsettled investors due to uncertainty over the scale and holders of the hidden debt.

Read at www.theguardian.com