In short: Bankrupt; its DIP loan (on the highest-quality assets, normally near par) traded in the 30s last week — "atrocious" underwriting; likely 10–20 more like it.
First Brands is a private auto-parts maker that went bankrupt. The alarming detail: its "DIP loan" — a loan made to a bankrupt company against its best assets, which almost always trades near full value because it's first in line to be repaid — traded down in the 30s (cents on the dollar). That signals "atrocious" underwriting, and he believes there are 10–20 more hidden cases like it.
10:59Who's caught holding the bag? What breaks first? Well, it's already breaking. The CoreWeave bonds were 104 in September, now they're in the low 90s — that total yield is near 12%, single/double-C type yield on a single-B credit. And then we saw the First Brands dip last week. This is debtor-in-possession financing — a loan on your highest quality assets. I've never seen a DIP with that close to the bankruptcy. The bankruptcy was in September. Typically a DIP trades at par. That loan last week traded in the 30s.
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