The recent Bloomberg report that BlackRock is seeking to redeem cash from the Point Bonita fund – following First Brands Group’s bankruptcy – marks a pivotal moment for trade finance and working capital funders. Here’s what’s happening, and why it matters:
1. Forced Liquidity Events and Program Terminations
When a major investor like BlackRock requests redemption, fund managers face pressure to return cash quickly. If a significant portion of the fund (in this case, 25% exposed to First Brands) stops generating returns, managers may be forced to gate redemptions, unwind programs or seek new partners to stabilize their portfolios.
2. Collateral Complexity and Credit Risk
Point Bonita’s $3 billion portfolio included receivables tied to First Brands, with $715 million invested in those receivables. The bankruptcy triggered a halt in payments, and now advisers are investigating whether receivables were pledged as collateral more than once – a situation that could further complicate recovery and risk management.
3. Ripple Effects for Corporates
For corporates relying on these funders, the risk isn’t just the bankruptcy itself,it’s the potential for sudden liquidity gaps if funders pull back or terminate programs. This can disrupt AR/AP facilities and create operational headaches.
4. The Case for Funder Resiliency
GSCF’s approach stands in contrast. With zero exposure to First Brands and a funding base backed by Blackstone, our partners benefit from consistent liquidity and disciplined risk management –even in turbulent markets.
5. Strategic Options for Funders
- Terminate programs to return cash.
- Gate redemptions to buy time.
- Partner with new entities to maintain funding.
- Consider selling back books at par or a discount.
6. Call to Action
Corporates should proactively assess their funder’s risk management and contingency plans. If your funder is exposed to First Brands, now is the time to explore alternatives that offer stability and transparency.
Conclusion:
The First Brands situation is a wake-up call for the industry. Funder resiliency isn’t just a buzzword, it’s a necessity. At GSCF, we’re ready to help you navigate these challenges and secure your working capital for the long term.