On 28 September 2025, First Brands Group filed for Chapter 11 bankruptcy. The auto-parts maker — owner of FRAM, Raybestos, Autolite, TRICO — listed around $11.6 billion in liabilities. Roughly $2.3 billion of it sat in third-party factoring. Another $800 million sat in supply-chain finance. And about $2.3 billion in receivables could not be accounted for at all.
The founder and CEO, Patrick James, resigned. The Department of Justice opened a probe. Lenders who thought they understood the balance sheet discovered they had been looking at part of it.
The debt you cannot see on the balance sheet
Supply-chain finance is useful and, used honestly, unremarkable. A supplier gets paid early by a financier; the buyer settles with the financier later. Under US accounting rules it often sits in accounts payable rather than debt. That is the feature that turns into a hazard. A company can build enormous short-term obligations that never appear where a lender looks for debt.
The FASB tried to close the gap. Its 2022 standard, ASU 2022-04, requires buyers to disclose supplier-finance program terms and outstanding balances. But it is a disclosure rule, not a reclassification — the obligations still are not counted as debt. Analysts have tied that gap directly to how First Brands stayed opaque for as long as it did.
Moody’s senior analyst David Gonzales flagged the warning sign before the collapse: supply-chain-finance invoice dates “can get later and later,” and heavy reliance on it “poses a risk to a company’s liquidity.” Stretching payment terms is how a distressed buyer buys time. It is also, read correctly, a signal.
Why one auto-parts maker rattled central banks
First Brands did not stay a niche story. JPMorgan CEO Jamie Dimon, on the bank’s October 2025 earnings call, delivered the line that framed the quarter: “When you see one cockroach, there are probably more.” Short-seller Jim Chanos told the Financial Times he expected “more of these things, like First Brands,” as the credit cycle turns and private credit adds another layer between lenders and borrowers.
Central bankers reached for the 2008 comparison directly. Bank of England Governor Andrew Bailey asked whether the collapse was “the canary in the coal mine.” Deputy Governor Sarah Breeden said “we can see parallels with the global financial crisis.” The product at the centre of it — supply-chain finance — is a market the WTO and IFC size at roughly $2.3 trillion.
The pressure is not isolated
First Brands failed into a tightening environment. Allianz Trade forecasts global business insolvencies rising 5% in 2026, a fifth straight annual increase, running about 24% above pre-pandemic averages. In the first nine months of 2025 it counted 327 major insolvencies — one roughly every 20 hours — putting an estimated 2.1 million jobs at risk.
Tariffs are adding to the strain. Citi’s Supply Chain Financing report, published in February 2026, found that on average 6.3% of corporate working capital is now tied up funding tariff costs, as US tariffs climbed to around 16.8% from 2.4%. Money locked in duties is money not available to a supplier already stretched thin.
What to actually check
The lesson of First Brands is not that supply-chain finance is dangerous. It is that a key supplier’s reliance on it can be invisible until the supplier stops. So make it visible: ask key suppliers to disclose their supply-chain-finance and factoring exposure, and treat a sudden lengthening of their payment terms as the distress signal Moody’s says it is. Watch for refinancing that stalls once lenders start scrutinising quality of earnings — the precise stumble that preceded the First Brands filing.
A supplier that fails on a Friday can halt your line on Monday. The exposure was always there. First Brands just made it impossible to keep ignoring.