First Brands’ Fallout Exposes Risks of Lending Private Debt (1)

Since First Brands Group filed for bankruptcy with over $10 billion of liabilities, the market has been focused on blows to its broadly syndicated investors and trade finance providers. Some of the debt has plunged to around 36 cents on the dollar, with investors facing hundreds of millions of dollars of losses.

But the company benefited from another set of lenders that are now asking to be paid back: Private credit. These firms gave First Brands its last infusion of cash before its collapse, an unraveling that capped weeks of investor concern about the company’s use of opaque, off-balance-sheet ...