UBS Group AG Shares Plunge 2.65% as First Brands Bankruptcy Sparks $500M Exposure Concerns

UBS Group AG’s shares fell to their lowest level since August 2025, with an intraday decline of 2.65%, extending a two-day losing streak that trimmed 3.24% from the stock’s value. The selloff reflects growing concerns over the bank’s exposure to the collapse of First Brands Group, a U.S. automotive parts manufacturer that filed for Chapter 11 bankruptcy on Sept. 29, 2025, with liabilities exceeding $10 billion. UBS, through its Hedge Fund Solutions platform and UBS O’Connor funds, holds over $500 million in unsecured claims against the defunct firm, including $349.8 million tied to supply-chain-finance arrangements.

The bank’s involvement in First Brands’ downfall stems from a 2023 investor deck titled *UBS Working Capital Finance Strategy*, which promoted the company as a case study for a “short-duration, self-liquidating” structure offering 17% fixed yields. However, the strategy’s economic logic was flawed, as no solvent company would willingly sacrifice 17% of its margin to delay supplier payments. First Brands, engaged in a debt-fueled acquisition spree, relied on opaque financing mechanisms, including layered securitizations and commingled collateral, which ultimately collapsed under liquidity pressure. UBS’s marketing of the product, despite clear red flags, has drawn scrutiny over its risk-assessment practices and ethical obligations to investors.

This episode echoes UBS’s past controversies, including its role in the 2023 Greensill Capital collapse and its sale of complex derivatives to Swiss clients. While the bank’s direct losses from First Brands are confined to its investment funds, reputational damage looms large, particularly amid ongoing integration of Credit Suisse and heightened regulatory scrutiny. Swiss proposals requiring UBS to add $26 billion in capital under “too big to fail” reforms further complicate its strategic outlook. The bank’s recent delay of net-zero targets to 2035 underscores the trade-offs it faces in managing overlapping crises.

Analysts highlight structural risks in supply-chain-finance models, where opaque structures and adverse selection—where high-yield offers attract distressed borrowers—can lead to sudden liquidity crises. UBS’s failure to disclose these risks in its promotional materials raises questions about its commitment to transparency. As regulators and investors demand clearer accountability, the bank’s ability to rebuild trust will be critical to stabilizing its stock and navigating a fragile market environment.