How Moody's data flagged signs of fragility in First Brands

How Moody’s EDF-X data flagged early signs of stress and fragility in First Brands

On September 28, 2025, First Brands Group filed for bankruptcy, sending tremors through private lending and capital markets. Despite being privately owned, First Brands had established itself as a leading manufacturer of aftermarket automotive parts, whose growth was driven largely by an aggressive, private debt-funded acquisition strategy. While this enabled rapid expansion, this approach also heaped onto First Brands the financial stress that led to their downfall, something that Moody’s began to flag well before the official bankruptcy declaration.

Moody’s probability of default analysis and private data flag concerns

Although the collapse of First Brands may have been unforeseen to many, Moody’s identified the first warning signs in late 2024. Through Moody’s EDF-X credit risk platform, the Probability of Default (PD) for First Brands exceeded its trigger level in November 2024, approximately ten months prior to the bankruptcy event. This rise in PD was attributed to private trade-payment data, which revealed lapses in payment of obligations by First Brands. While this information did not warrant immediate action, prudent investors and lenders could have set an alert for First Brands, continuing to monitor underlying data and remaining on the lookout for further trouble.

In December 2024, First Brands’ PD escalates significantly and surpasses the trigger level as private data suggests liquidity concerns. Investors and lenders with access to this information would likely raise concerns and reassess their exposure to First Brands, considering strategies to hedge against risk and potential loss.

Conventional credit risk analysis may lag

In August 2025, First Brands came under increased lender scrutiny following an unsuccessful attempt to refinance its debt. This scrutiny subsequently exposed First Brands’ highly leveraged position and liquidity challenges, and ratings agencies began downgrading First Brands. As these events unfolded, Moody’s had already been tracking First Brands’ PD, flagging it as having more than doubled since November 2024.

EDF-X PD for First Brands rose sharply months before secondary loan prices declined, underscoring the lag between fundamentals and market sentiment

The rapid exposure of First Brands’ true financial situation caught many off-guard, as investors attempted to sell their positions but encountered a severe collapse in prices. Loan values dropped significantly within days. Likewise, lenders faced challenges in divesting from First Brands due to their complex capital structure, previously undisclosed off-balance sheet liabilities, and further delays in communication and transparency.

Between First Brands’ PD initially crossing its trigger level in November 2024 and their bankruptcy declaration in September 2025, Moody's had tracked their PD as more than doubling to approximately 8%, providing a glaring indication of heightened risk to investors and lenders.

What happens without the right data?

Nonetheless, many investors and lenders either did not have access to the private data needed to scrutinize First Brands or lacked the analytical resources to identify potential concerns. Less than a month before the bankruptcy, First Brands’ 1 st Lien Term Loan continued to trade at around 96 cents on the dollar, and the market remained unaware of what was to come.

As a result, many investors may have had to sell at a loss, and many lenders may still be entangled with First Brands, trying to navigate their complex capital structure and perform damage control with stakeholders and the public.

Without the proper analytical tools, those exposed to First Brands would have had a difficult time estimating just how widespread this damage was. Ultimately, the bankruptcy ended up affecting $2.6B of debt across 1,100 CLO vehicles managed by more than 80 managers.

The path forward and the future of private lending

First Brands is a reminder that credit events rarely appear without warning; they simply require the right data to detect. For private lenders and CLO managers, the lesson is clear: integrating forward-looking, behavior based analytics like EDF-X into portfolio surveillance can illuminate emerging risks well before they become systemic. Moody’s provides the solutions and capabilities needed to navigate the emerging private markets, providing the capabilities and insights needed to support long-term growth and sustainability. Read our First Brands EDF-X case study.

The full First Brands Group CLO Exposure Report is available for download. This report, which details exposures across more than 1,100 CLOs, is powered by Moody’s Structured Finance Portal. To access additional reports, analytics, and portfolio tools covering over 12,000 deals globally, learn more about Moody’s Structured Finance offerings.