Point Bonita Capital, a fund belonging to investment bank Jefferies’ trade finance arm, has US$715mn in exposure to receivables of collapsed US auto parts supplier First Brands.
The exposure represents around a quarter of the US$3bn in trade finance assets managed by the fund, a division of Jefferies unit Leucadia Asset Management, Jefferies said in an October 8 statement.
First Brands previously directed its purchasers – including firms such as Walmart, Autozone and Advanced Auto Parts – to transfer funds on Point Bonita’s behalf under factoring arrangements, but stopped doing so on around September 15, according to Jefferies.
First Brands filed for bankruptcy in late September after weeks of media reports that it had accumulated vast amounts of off-balance sheet financing, and that Jefferies had earlier failed to raise around US$6bn in new debt for the group.
Initial bankruptcy filings suggested First Brands had around US$866mn in outstanding supply chain finance facilities, including a significant portion arranged by working capital platform Raistone.
Overall, First Brands Group companies have US$11.6bn in liabilities, including US$2.3bn from factoring arrangements, according to court filings.
First Brands used both factoring arrangements to receive cash due from buyers early, as well as payables finance programmes to allow it to pay its own suppliers later.
An independent investigation is underway into First Brands’ factoring practices, including into whether the same receivables may have been factored more than once.
In its statement, Jefferies acknowledges the probe but says the bank has “not yet received any information regarding the results of that 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.”
Point Bonita manages US$3bn of trade finance assets on behalf of institutional and other investors, the statement says, supported by US$1.9bn in invested equity – US$113mn of which is from Leucadia.
Besides Leucadia, court filings list three creditors with exposure related to First Brands factoring programmes: Raistone, Evolution Credit Partners and Katsumi Global.
GTR revealed last week that Raistone made as much as 80% of its revenue from its relationship with First Brands.
Separately, creditors with exposure to First Brands supply chain finance programmes include UBS fund 1977 O’Connor and CIT Group, a subsidiary of First Citizens Bank.
