UBS Faces Billions in Losses After First Brands Bankruptcy
Swiss banking behemoth UBS faces substantial losses following the bankruptcy of prominent US auto supplier First Brands. The insolvency, with disclosed liabilities surpassing $10 billion, has impacted UBS's 'UBS Working Capital Finance Opportunistic Fund', which had significant investments in the company.
UBS's fund was heavily exposed to First Brands, with around 9% directly invested and 21% indirectly. This concentration risk may prompt the fund to inform investors in the coming weeks. The exact extent of UBS's debts from the US state of Ohio remains unknown.
The insolvency could result in billions of losses for some of the largest players in the private credit market. Funds under the UBS umbrella had invested over half a billion dollars in First Brands, with one being the largest creditor. The UBS fund has lost between 10 and 20% of its value, with assets estimated in the hundreds of millions.
Some funds, including those under the UBS umbrella, had engaged in short selling before First Brands' collapse. These funds could potentially benefit from the company's collapse, although no specific companies are directly named. The UBS fund's losses indicate that related investment funds and their competitors may be affected differently.
UBS's exposure to First Brands' insolvency highlights the risks of concentrated investments. The bank is likely to face significant losses and may need to inform investors about the concentration risk. While some funds may have benefited from short selling, the overall impact on the private credit market is expected to be substantial.
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