Unhedged Troubling signs in corporate debt
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Sep 25, 2025 Concerns are rising as First Brands Group prepares for bankruptcy amid massive debt, while Tricolor, a subprime auto lender, faces troubles linked to shifting migration patterns. The hosts discuss the implications of these cases as potential warning signs in credit markets. They delve into the complexities of private credit and how it obscures true leverage levels. With corporate bond spreads narrowing, questions arise about the sustainability of this market exuberance. Plus, a lighthearted debate over collective nouns for canaries adds some humor to the discussion.
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Roll-Up Firm That Blew Up
- First Brands is a roll-up of car-parts makers that borrowed heavily to buy other firms and now looks headed for bankruptcy.
- Robert Armstrong explains roll-ups often either create huge winners or borrow too much and blow up.
Subprime Lender Hurt By Immigration Shake-Up
- Tricolor lent to low-credit immigrants, even selling cars directly, and now faces mass defaults linked to immigration enforcement and people leaving.
- Robert Armstrong describes how borrowers stopped paying when they avoided work or left the country.
Huge Compression In Credit Spreads
- Credit spreads between corporate bonds and government bonds have narrowed dramatically over recent years.
- Robert Armstrong notes high-yield spreads fell from about 6% to roughly 2.7%, a huge compression in compensation for risk.