UBS Stung for Half a Billion as First Brands Bankruptcy Unravels Supply-Chain Finance Bets
The Swiss banking giant finds itself at the center of a $500 million mess, raising fresh doubts about the risks lurking in trade finance.
UBS is staring down losses of more than half a billion dollars after the collapse of First Brands Group, the auto parts conglomerate that filed for bankruptcy on September 28 with more than $11 billion in liabilities. The Swiss lender, through several of its investment arms, is the largest unsecured creditor—and at the same time a participant in the company’s emergency financing package. That combination shows just how deeply entangled the bank has become in one of the biggest supply-chain finance failures since Greensill’s implosion.
Court documents paint a complicated picture: unsecured claims, secured loans, disputed collateral, and whispers of fraud. Judges and creditors now face the thorny task of figuring out who really owns what, and how much, in a capital structure that looks more like a spider’s web than a balance sheet.
Did you know: Auto‑parts giant First Brands entered Chapter 11 with roughly
6.1billion in on‑balance‑sheet debt plus billions more in off‑balance‑sheet supply‑chain finance and factoring, prompting a probe into possible double‑financing, yet courts approved a1.1billion DIP (with500million immediate) to keep operations running and limit supply shocks—leaving the heaviest losses with private‑credit, SCF/factoring funds, CLOs and some BDCs, but with rating agencies judging the broader market impact as contained.
A Three-Pronged Headache
UBS’s exposure isn’t neatly contained in one bucket. It stretches across three different businesses.
- Its hedge fund unit, Hedge Fund Solutions, tops the list with roughly $233.7 million in unsecured claims. Those dollars were advanced against First Brands’ customer invoices—claims now sitting behind a wall of competing creditors and potential fraud allegations.
- O’Connor, UBS’s hedge fund arm soon to be sold to Cantor Fitzgerald, has about $116 million tied up. One of its funds reportedly devoted nearly a third of its portfolio to First Brands-related receivables. That level of concentration now looks reckless.
- Finally, UBS Asset Management has over $160 million in secured loans and a facility tied to First Brands, plus a piece of the $1.1 billion debtor-in-possession financing approved by the bankruptcy court. While those secured and DIP positions offer priority treatment, they don’t fully balance out the looming unsecured losses.
In other words, the bank is fighting on several fronts at once.
Double-Dealing with Invoices
At the core of this collapse is an uncomfortable question: did First Brands sell the same invoices to more than one lender? Internal investigations point to a “multi-billion dollar discrepancy” in its factoring program. If those suspicions hold up, then many creditors who thought they had secured claims may find themselves reduced to unsecured status—forced to share scraps with everyone else.
The judge overseeing the bankruptcy has already flagged the issue during DIP hearings. Onset Financial, another creditor, pushed back on the rescue loan, claiming its collateral rights were being trampled. The court allowed an initial $500 million draw but reserved judgment on the rest. For now, it’s a waiting game.
For UBS’s unsecured funds, the outcome could be brutal. In past trade finance fraud cases, investors recovered only pennies on the dollar. Greensill’s collapse is still fresh in memory—where “true sale” claims turned out to be anything but.
A Crowd of Burned Creditors
UBS isn’t alone in this mess. CIT Group, Wafra, Pemberton Capital, Orbian, and Fasanara Capital are all listed as creditors with exposures ranging from tens of millions to hundreds. One mysterious filing shows a “Trade Finance Company” with a $208 million claim, though the UK firm by that name denies involvement, adding another twist to the story.
Collateralized loan obligations are also feeling the ripple effect. Around 70 U.S. CLO managers hold First Brands loans, though exposure is small on a deal-by-deal basis. Still, it adds up to nearly $2 billion across the system.
Meanwhile, fintech platform Raistone, a key player in First Brands financing, faces its own crisis. Court papers tie the firm to more than $600 million of creditor claims. It has already cut jobs as liquidity strains mount—a reminder that when the dominoes fall in trade finance, intermediaries often topple too.
What Recovery Might Look Like
Nobody knows yet how much creditors will get back. But scenarios are starting to take shape.
- Worst case: widespread double-financing confirmed, clawbacks triggered. Unsecured claims could recover less than 10 cents on the dollar. Secured loans might see 50 to 70 cents after fees.
- Middle ground: overlap limited, settlements negotiated. Unsecured creditors could claw back 10–25 cents, while secured lenders recover closer to par.
- Best case: minimal fraud, assets sold competitively. Recoveries climb toward 40 cents for unsecured claims.
Analysts say the middle outcome looks most plausible right now. That means UBS could limit its group-wide losses, but the reputational hit will be harder to contain.
Lessons for the Market
For investors, the safest bet is the DIP financing. It carries super-priority status, fat fees, and close monitoring of collateral. Secured loans may also attract bargain hunters once the dust settles. But unsecured trade-finance claims? Analysts warn they’re toxic until invoice integrity is proven.
For UBS shareholders, the numbers aren’t catastrophic. Even if the bank lost the full $500 million, it wouldn’t threaten its capital base. The bigger problem is perception. This is the second time in just a few years that UBS has been linked to a trade finance scandal. Regulators and clients will want to know how risk controls allowed such concentrated exposure to a single borrower.
The pending sale of O’Connor to Cantor Fitzgerald now looks complicated too. Price adjustments or indemnities are almost certain, though the deal itself is unlikely to collapse.
What Comes Next
The court still has to approve the remaining $600 million DIP tranche, and its ruling will send a strong signal about how competing claims stack up. Any examiner’s findings on the scale of double-pledging will reset recovery expectations overnight. And the priority dispute raised by Onset Financial could reshape how proceeds are divided.
For the broader world of supply-chain finance, First Brands is another cautionary tale—one that echoes Greensill. It shows how fragile the system can be when lenders put too much faith in opaque receivables. More regulatory scrutiny seems inevitable.
As for UBS, the money lost may be manageable, but the questions it faces are harder. How did half a billion dollars end up spread across one troubled company through multiple fund strategies? And why didn’t the bank’s much-touted risk systems catch it in time? Those answers will take months, but the damage to its reputation is already here.
House Investment Thesis
| Category | Summary |
|---|---|
| Event & Core Problem | First Brands Chapter 11 filing (Sept 28-30, 2025) with >$11bn liabilities. Core issue is a potential Greensill-style double-pledging/commingling of receivables, creating a multi-billion dollar discrepancy. This subordinates unsecured supply chain finance (SCF) claims. |
| Primary Exposure | UBS Complex is the most exposed name: UBS Hedge Fund Solutions ( |
| Other Creditors | Other unsecured/SCF: 1977 O'Connor, CIT/First Citizens, Wafra, Pemberton, Orbian, LiquidX/Fasanara (~$71m). CLOs have thin, granular exposure (~0.5% per deal). Raistone is a critically exposed intermediary with high counterparty risk. |
| Recovery Math (Judgment) | Recovery hinges on scale of double-pledging. Base Case: Unsecured SCF 10-25%, Secured 70-85%, DIP par+fees. Bear Case (if double-financing proven): Unsecured SCF 0-10%. DIP is the best risk-adjusted paper. |
| Systemic & Reputational Risk | Systemic risk is limited (CLO impact immaterial). Reputational risk is high, especially for UBS (Greensill déjà vu) and trade-finance fintechs like Raistone. |
| Key Dynamics & Catalysts | Priority fight between DIP, ABL, and Onset Financial's inventory claim. What to watch: Court rulings on the remaining $600m DIP, examiner's findings on double-pledging, Onset vs. estate collateral fight, and Raistone's liquidity. |
| Actionable Trade Ideas | 1. Participate in the DIP (superpriority). 2. Buy secured term loans on panic prints. 3. Avoid/short unsecured SCF claims. 4. Sell UBS CDS protection into headline-driven spikes. 5. Underweight SCF platforms with concentrated risk (e.g., Raistone). |
| Bottom Line | Own the DIP, trade the secured, shun the unsecured. Use UBS headline volatility, don't fear it—this is a reputational, not solvency, issue. Expect a messy process with unsecured SCF recoveries skewing low-teens. |
Investment decisions always involve risk. Past performance is no guarantee of future results.