lunes, 20 de octubre de 2025

lunes, octubre 20, 2025

The secretive First Brands founder, his $12bn debt and the future of private credit

Patrick James borrowed billions — even after presiding over a string of failed businesses

Robert Smith and Ortenca Aliaj in London and Eric Platt in New York

© FT montage/Adam Dew/Vimeo/Getty Images


First Brands chief Patrick James had been here before.

Well over a decade before the lightning-fast collapse of his auto-parts conglomerate shook the highest echelons of Wall Street, the Ohio-based businessman was battling creditors in court over millions of dollars in defaulted debts and fending off allegations of fraud.

James always denied such accusations. 

He settled and moved on. 

Soon he was on to his next project, assembling a new group of lenders to help him form a conglomerate from a ragbag collection of factories making spark plugs, brake components and windscreen wipers from Pennsylvania to California.

This time, however, James’s borrowing binge coincided with a new boom in risky debt and he enlisted some of the biggest names in US finance.

How he raised billions of dollars with little public scrutiny, after moving on from more conventional forms of borrowing, is a story not just of one man’s past practices and the debt and lawsuits that they spawned.

It is also a reflection of the nearly $2tn private credit industry — lending by non-bank institutions that can often be opaque — and the broader risks created by its rise.

When James was looking to tap new sources of financing in the 2010s, money was rushing into the private credit market, a new cadre of financiers willing to overlook the occasional red flag. 

Lenders were now no longer handing him over millions of dollars; they were wiring his businesses billions.

Along the way James amassed the trappings of a billionaire. 

Having arrived in America decades earlier as an immigrant from Malaysia with little apparent wealth, he collected trophy homes ranging from farmsteads in rural Ohio to ocean-view mansions on both coasts of America.

A rural property in Ohio, US, which was acquired by First Brands founder Patrick James © Adam Dew/Vimeo


A phalanx of private security staff kept careful watch over his prized properties, while elite lawyers gave up the security of their multimillion-dollar partnerships to become his senior lieutenants.

Then, in a blink of an eye, the edifice collapsed.

As questions grew around the finances of James’s acquisition-hungry group, First Brands went in a matter of weeks from trying to borrow a further $6bn to filing for bankruptcy. 

And, just this Monday, James stepped down from the company he founded.

“Unfortunately, First Brands experienced financial distress due to a perfect storm of tariffs, volatile interest rates and well-known industry headwinds,” a spokesperson for the publicity-shy executive told the Financial Times.

They added that the First Brands founder “has always conducted himself ethically” and is now “focused on doing everything he can to support the maximisation of value for the company’s customers, employees and lenders during the restructuring process”.

Some fear that, rather than a freak occurrence, First Brands is an omen of corporate flame-outs to come after years of loosening lending standards.

Jim Chanos, the legendary short seller who predicted the collapse of Enron in the early 2000s, believes the debacle has exposed the myth that private credit is a “magical machine” that can turn lead into gold.

The bankruptcy filing was only the beginning of a harrowing experience for the group’s lenders. 

It was soon revealed that First Brands, which last year made a loss of $12mn, had racked up close to $12bn in both conventional loans and off-balance sheet financing. 

That was billions of dollars more than many of its lenders had realised.

Even worse, an investigation under way as part of the bankruptcy began to probe whether the invoices and inventory underpinning much of the group’s financing were pledged “more than once” or “commingled” between lenders. 

Department of Justice prosecutors are also examining how so much money disappeared so quickly.

Many lenders now fear they may have fallen prey to a shell game, involving hidden off-balance sheet entities and phantom collateral. 

One lawyer told a Texas courtroom this month that his client was as much a “victim” as a creditor. Another claims that more than $2bn extended by lenders “simply vanished”.

With the US industrial heartlands being reshaped by Donald Trump’s tariffs, the auto-parts sector’s reliance on invoice factoring has been coming under scrutiny © Mandel Ngan/AFP/Getty Images


Billions of dollars in losses have been collectively inflicted on titans and pioneers of private capital, such as Blackstone and CarVal, to little-known equipment leasing firms.

Financial institutions from Zurich to Tokyo are facing reputational damage for their dealings with a company that was scarcely known outside the murkier corners of credit markets until a few weeks ago. 

Even insurance firms may now be on the hook after writing policies against the complex financial products that funded First Brands.

Many have been baffled as to how James, a man with a string of failed businesses behind him, was able to borrow billions. 

John Pierpont Morgan, a founding father of American capitalism, said the first principle of credit was “character”. 

And yet some First Brands lenders said they had scant information about the man behind the sprawling auto-parts supplier.

So skeletal is James’s online presence that two investors who employed external investigators to perform a deep dive on him said that it appeared the privacy-conscious businessman had employed professionals to remove his photos and information from the internet.

A ‘frank and simple guy’

James’s story began in Malaysia’s urban sprawl, nearly 10,000 miles away from the rolling plains of Ohio. Born in 1964 to a Catholic family of Indian descent, he attended a school administered by the De La Salle Brothers religious order in Petaling Jaya, a satellite township of Kuala Lumpur. 

James studied in Petaling Jaya, a satellite township of Kuala Lumpur in Malaysia © Getty Images


In the wake of First Brands’ bankruptcy, some lenders have even speculated whether the mogul once changed his name. 

But a 1983 yearbook for his school lists him as Patrick James, next to a photo of the smiling teenager.

He subsequently moved to America to study at The College of Wooster, in the rustbelt state of Ohio. 

In a 1984 book of new students, in which his boyish face appears framed by thick glasses, he described himself as a “frank and simple guy”. 

He added that he was “an outgoing person who loves parties, dancing, music and meeting people”.

Before long he was running Ichabod’s, the on-campus bar, and had what The Wooster Voice described as “ambitious” plans to overhaul it. 

A later yearbook showed he was also a member of an investment society in which students “used real money to invest in real stocks”.

He stayed in Ohio to remake himself as an industrialist. 

While the state’s manufacturing base had seen better days, it continued to punch above its weight in turning out parts for planes, trains and automobiles.

Compared with some of the swaggering titans of industry, James had an unassuming presence, with wire-framed glasses and closely trimmed hair. 

In the 1990s and 2000s, he and various business partners bought up one metalworking plant after another, through investment vehicles such as Viking Industries and Hawthorn Manufacturing. 

In a 1984 book of new students at The College of Wooster in Ohio, James described himself as a ‘frank and simple guy’ © Vkkarri/Dreamstime


Court filings show that James’s companies sometimes did business with one another. 

James also paid himself management fees from several of his ventures, which were variously described as “lucrative” and “substantial” in later lawsuits.

“This guy has an MO,” said one Ohio industrial executive who has known James since the 1990s, before listing the names of a string of businesses that collapsed after he took over. 

Lawsuits and local newspapers from the 2000s are littered with accounts of closed plants and bankruptcies, leaving aggrieved lenders chasing him through courts to seize his assets. 

Worthington Steel, one of Ohio’s largest steelmakers, claimed James put $1.2mn of his personal wealth on the line in 2005, in exchange for “forbearance” on an alleged default. 

Worthington levelled fraud allegations against him after his business allegedly defaulted once again, including that he had “instructed employees” to “shred” books and records to hide his “gross mismanagement”.

Worthington Steel claimed James put $1.2mn of his personal wealth on the line in 2005, in exchange for ‘forbearance’ on an alleged default


James said he was “fraudulently induced” into signing the guarantee, strongly denied the allegations and launched a counterclaim.

His spokesperson describes the idea that he ordered the destruction of evidence as “particularly egregious” and “patently absurd”. 

The case was ultimately dismissed after the two parties settled.

Another lender claimed in 2009 that James’s companies had made “misrepresentations and omissions relating” to the assets that formed the basis of their collateral. 

The regional bank behind the lawsuit alleged that James had continued to pay himself management fees even after the business in question had “already shut down all operations”. 

In a further case in 2011, James was accused of creating a “web of companies” to transfer out funds “in an attempt to defraud” creditors. 

His spokesman links those “complex disputes” to the aftershocks of the financial crisis, when even the likes of GM and Chrysler filed for bankruptcy protection, adding that “any allegations of improper dealings by Mr James were categorically false”.

After settlements were reached for such remaining cases, James was ready to begin anew. 

As the American economy rebounded, he turned his attention to consolidating the fragmented auto-parts sector, borrowing afresh to do so.

The Ohio-based executive who has known James for decades claimed that his history of debt defaults made it harder for him to tap local banks for financing.

“In asset-based lending, these guys have rubber gloves on when they look at us,” he said, adding that experienced banks give even businesses with spotless credit histories the equivalent of a “colonoscopy”.

James’s spokesperson contended that he was “deeply diligenced without any issue hundreds of times by hundreds of counterparties — including both banks and customers”.

He also had a signal piece of good fortune. 

James’s next act dovetailed with the rise of a new breed of lender, flush with capital and not bound by the strictures of banking regulation.

Flexible lenders

As new forms of private lending continued their rise, one Wall Street bank was critical in arranging many of the deals that provided James with new sources of financing.

Jefferies has long been known for its hard-charging style in selling riskier debt to yield-hungry investors. 

Over his near 25-year tenure at the helm, the firm’s swashbuckling CEO, Rich Handler, moulded the bank in the image of his “friend, mentor and hero” Mike Milken, the 1980s junk-bond king.

In 2014, Jefferies was on hand with a loan for the deal that would form the foundation for what became First Brands: James’s acquisition of Trico Products, a Michigan-based manufacturer of windscreen wipers.

Handler emphasised at the weekend that First Brands “engaged with a range of banks and Wall Street firms over the last 10 years”.

Rich Handler said that First Brands ‘engaged with a range of banks and Wall Street firms over the last 10 years’ © Brian Ach/Getty Images


But during that period his bank concluded deal after deal with the Ohio-based group.

Jefferies, which does not take deposits, generally did not underwrite such loans. 

Instead, it passed on much of the risk outside the banking system to collateralised loan obligations, investment vehicles that transform risky loans into bonds with pristine credit ratings through the alchemy of securitisation.

Several CLO managers told the FT that many of their peers were likely to have done only cursory checks on James’s business record in their haste to package his company’s debt up into tradeable securities. 

While Jefferies’ stock in trade was selling risky loans to investment funds, James also made heavy use of supply-chain financing — a controversial tool through which a bank pays a company’s suppliers, in an arrangement accountants do not class as debt.

In addition, First Brands tapped other forms of borrowing tied to assets, inventory and invoices, although it consistently also took out traditional bank loans.

One early financier was Greensill Capital, which in 2015 began to provide tens of millions of dollars linked to the invoices of James’s holding company, Crowne Group, according to documents seen by the FT.

Greensill later imploded in its own financial scandal in 2021. 

But even though its collapse made some investors wary of such relatively opaque financing, James was able to raise billions of dollars — most of it from private credit firms that argued that “asset-backed” lending was relatively safe.

Such invoice lenders typically dealt with James’s older brother, Ed, who became the point man for what First Brands called “working capital solutions”. 

Much of the funding linked the group to considerably bigger financial players.

UBS’s Chicago-based hedge fund unit O’Connor bought a stake in Raistone, a technology platform that provided supply-chain financing to First Brands. 

It also directly invested in First Brands’ invoices, as did a joint venture between Japan’s Mitsui & Co and Norinchukin Bank.

Jefferies also took part in the trade through Point Bonita Capital, a private credit fund focused on invoice lending that assured investors it did “deep research and credit analysis”.

And then came Onset Financial, a Utah-based private lender that claimed to have amassed $1.9bn of exposure to First Brands’ inventory-backed debt by the time of its bankruptcy.

In an online case study that appears to refer to First Brands, the equipment leaser acknowledged it initially provided financing even though a recent reorganisation had “made it tough to assess an accurate financial picture” of the company.

Investors in some funds claimed they were unaware how much of their exposure was linked to James’s patchwork of auto-parts makers © Houston Cofield/Bloomberg


Filings show that lenders often booked double-digit yields on First Brands’ off-balance sheet invoice and inventory financing.

Investors in some funds claimed they were unaware how much of their exposure was linked to James’s patchwork of auto-parts makers. 

Firms such as UBS O’Connor and Point Bonita said the risk primarily lay with the many blue-chip customers named on its invoices, such as Walmart.

But after the bankruptcy, Raistone and Point Bonita revealed that they never received funds from such customers directly. 

Instead, the funds were returned to them via First Brands.

Several asset-backed finance specialists said they had either refused to do business with First Brands or had cut back existing credit lines after the company was unable to produce requested documents.

Other potential lenders claimed to have received unsatisfactory answers when asking straightforward questions about its financial statements, with many noting that First Brands’ reported margins far exceeded those of its competitors.

One asset-backed lending specialist said that Ed James once rang him to tout a new inventory-backed deal, but the discussion turned tense when the lender explained that his team would need to travel down to First Brands’ sites to check a stock-list against the actual inventory. 

He recalled the curt reply of Ed James, who could not be reached for comment for this article: “We don’t let lenders into the warehouse.”

Salvation

By the 2020s, James was the owner of an international conglomerate with an enterprise value in the billions of dollars. 

He had rechristened his empire First Brands Group and set about enlisting lieutenants with deep ties to Wall Street’s biggest lenders.

In 2021 Michael Baker, an affable Canadian lawyer who had spent the previous decade as a partner at law firm Paul Hastings, jumped ship to become First Brands’ chief corporate strategy officer. 

At the time, he was one of America’s most successful corporate debt lawyers.

Baker did more than just join the C-suite at First Brands. 

He also became a trustee of the Sandor Foundation, a non-profit organisation James and his wife Elizabeth established in 2005 that predominantly donated to institutions linked to the Catholic church. 

Millions of Sandor’s donations were to a non-profit and church connected to Father Robert Stec, the gregarious priest who has served as pastor at Ohio’s St Ambrose Church since 2005. 

Stec also received almost $1mn for his services as a philanthropic consultant over seven years, according to public documents. 

Two people who worked closely with the First Brands founder said that Stec regularly visited James and his wife at their estate in Chagrin Falls, Ohio. 

James even constructed a chapel on the grounds of the estate, they added, which also includes five houses and two tennis courts.

It was just part of a real estate portfolio that stretched from coast to coast. 

Property records show that James also bought two farms in Ohio in the 2010s, complete with stables of prized horses. 

Purchases of oceanfront houses in Malibu and the Hamptons followed, with the $18.75mn acquisition of the latter in 2021 making headlines, even though the new owner’s identity was not public.

A small army of staff, including a security team drawn from the ranks of military veterans, worked round the clock to maintain and protect the luxury homes, along with a fleet of vintage cars.

‘Black box’

In the summer of 2025, Jefferies was shepherding First Brands to market with its biggest deal yet, a $6bn loan to refinance its existing debt. 

Audit firm BDO had given the company’s accounts a clean bill of health months earlier, but this time investors were a little more wary.

Facing more questions than usual about the company’s finances, Jefferies agreed to hit pause while First Brands commissioned another audit firm, Deloitte, to produce a report on its use of off-balance sheet financing to allay lenders’ concerns.

The shelved deal was cast as a small bump in the road, with management telling lenders at the end of August that it held more than $800mn of cash and was evaluating ways of recutting the deal. 

But, behind the scenes, First Brands was in trouble. 

With the US industrial heartlands being reshaped by US President Donald Trump’s tariffs, the auto-parts sector’s reliance on invoice factoring was coming under scrutiny.

First Brands had already missed hundreds of millions of dollars in interest payments to its main inventory lender, Onset, and James had quietly offered to pledge a 15 per cent stake in his company to keep the lender at bay. 

Other asset-backed lenders were already growing suspicious about the validity of their collateral.


The group’s loans began to crater after the FT reported in September that Apollo Global Management had quietly built a massive short position against First Brands’ debt. 

Nervous investors wondered what had prompted one of the savviest private debt players on Wall Street to take a massive bet against James’s company.

Before long the group’s debt was in free fall.

The largest lenders dumped their exposure as it became clear the group, which recorded $5bn of sales last year, would have to file for bankruptcy.

First Brands shifted $27mn between bank accounts in a bid to make payroll, only for it to be seized by a creditor.

Little over $12mn remained in its corporate accounts by the time Patrick James signed the bankruptcy papers. 

The Chapter 11 petition was filed shortly before midnight on Sunday, September 28, in a Texas court known for adjudicating some of the US’s messiest corporate collapses.

The group only avoided a full-scale liquidation due to a new $1.1bn rescue loan from its largest lenders. 

A lawyer for such creditors said his clients faced little choice other than to lend more money into a “black box” to keep the lights on. 

Until that week, many of First Brands’ mainstream lenders were unaware that the group had also raised billions of dollars backed by its inventory through off-balance sheet “special purpose entities”.

Not that such asset-backed lenders were in a much better position. 

Days after the bankruptcy, a lawyer representing Raistone emailed the counsel for the company to ask how much of the nearly $2bn that First Brands received from invoice lenders remained in a supposedly segregated account. 

He received a sobering response: “$0.”

With billions of dollars apparently missing without trace, James has gone from one of America’s least-known billionaires to the face of one of its biggest corporate scandals in years.

His spokesman counters that James has not been accused of any wrongdoing at First Brands “and is confident that the Board’s independent investigation will vindicate him”.

The fiasco has now captured the attention of regulators around the world, eager to learn whether First Brands was a one-off or a symptom of a more systemic malaise affecting Wall Street’s favoured forms of financial innovation.

Lenders used dark humour as a coping mechanism for the embarrassing losses. 

When First Brands started to teeter in August, one debt fund manager joked that their team was considering staking out James’s Malibu mansion — just so they could catch a glimpse of the man they worried had taken the credit markets for a ride.

James has been a man of mystery for much of his recent career, years in which he borrowed billions only to lose both his capital and, ultimately, leadership of the company that was the source of his wealth.

It is a trajectory he can barely have suspected during his high-school days in Malaysia. 

But back then he made a joke in his yearbook that has taken on new resonance as his creditors close in: “I’m broke.”

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