Market history · Private credit ·
Tricolor and First Brands: two failures that unsettled private credit
In September 2025 two US companies with large lender exposure failed in quick succession: Tricolor, a subprime auto lender, and First Brands, an auto-parts supplier that filed for Chapter 11 bankruptcy protection. Banks and private lenders were among those caught.
A law firm's review of the cases noted that lenders to First Brands believed they were providing debt at roughly five times earnings when, because of financing commitments off its balance sheet, the true figure was closer to twenty times. It also reported allegations that both companies had pledged the same loans to more than one set of lenders, and said the First Brands case raised doubts about private ratings from smaller agencies. The review added that the exposure was not limited to private credit: bank warehouse lines, syndicated loans and asset-backed securities were involved too.
Commentators were divided on whether these were isolated frauds or an early sign of wider stress. The same review attributed the losses largely to fraud and poor business practices rather than broad market weakness, while noting it was not yet clear how isolated they were.
The takeaway
In credit, the quality of the paperwork matters as much as the interest rate. Who holds the collateral, and whether anyone else claims it, decides what you recover.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.