PUBLISHED | Beyond the Balance Sheet: Factoring Facility Primer + First Brands Case Study

In today’s edition, we’re looking at off-balance sheet factoring facilities, a financing tool that has become one of the most controversial and misunderstood credit mechanisms. While traditionally used as a working-capital bridge, factoring has evolved into a complex form of financing, altering the perception of leverage. 

If you read our newsletter, then chances are you’ve also seen the headlines around First Brands Group’s bankruptcy, which has been popularized not only by its $10bn+ of liabilities, but also its $2.3bn of factored receivables. Those receivables sit at the center of an investigation into First Brands, and may have a lasting impact on future factoring facilities. 

This writeup breaks down how factoring works, how GAAP and bankruptcy law define a true sale of receivables, and why companies use factoring and off-balance sheet structures. We’ll use hypothetical examples to show how factoring can meet working capital needs, improve perceived liquidity, and complicate creditor recoveries. We’ll end with live updates on the First Brands situation, which tests nearly every concept covered in this piece.

Read it now: