Cantor Seeks New Deal on UBS Hedge Fund Unit Over First Brands Exposure

Recent developments surrounding UBS’s O’Connor hedge fund unit have drawn intense scrutiny as the fallout from the collapse of First Brands Group exposes significant risks. With exposure exceeding $500 million, UBS is reportedly exploring fresh terms with Cantor Fitzgerald the buyer of O’Connor to reflect the mounting financial stress and reputational risks.

What’s Going On with First Brands and UBS Exposure

• First Brands Group, a U.S. auto-parts supplier, recently filed for Chapter 11 bankruptcy protection after creditor concerns emerged over irregularities in the company’s financial reporting. The company carries more than $11 billion in liabilities. 

• UBS has exposure to First Brands through multiple channels: invoice-factoring arrangements, supply chain finance agreements, debt, and working capital financing. These are spread across UBS’s hedge fund unit (O’Connor), Hedge Fund Solutions, and other private-credit and supply chain instruments. Total exposure is estimated to be over $500 million. 

• In one fund under O’Connor’s “Opportunistic Working Capital Finance” strategy, about 30% of the fund’s portfolio is tied directly or indirectly to First Brands—9.1% via direct invoice financing, and another ~21.4% through invoices from First Brands’s customers. 

Why Cantor May Want a “New Deal”

Cantor Fitzgerald agreed earlier in 2025 to acquire O’Connor from UBS, a deal that will transfer ~$11 billion in invested assets across multiple strategies. However, the First Brands exposure adds an unexpected strain:

1. Risk Reallocation: Cantor may seek to renegotiate price, deal terms, or liabilities, arguing that this exposure was not fully known or quantified when the deal was agreed.

2. Reputation & Legal Risk: The exposure raises red flags about risk management, legal claims, and transparency especially since investors expect checks on concentration risk and collateral legitimacy. Doubts over invoice collateral (possible double-pledging) have already surfaced. 

3. Regulatory and Capital Impacts: Given that UBS is under regulatory scrutiny, and Cantor will be managing these assets post-deal, both parties may need to account for potential losses, capital reserves, or client disclosures. 

Possible Outcomes and What to Watch

• Price Adjustment or Indemnity Clauses: Cantor could request a discount or some form of indemnity if the First Brands exposure results in material losses.

• Shared Loss Allocations: There might be agreement for UBS to absorb a portion of the losses as part of the transition, or for risk to be shared over time.

• Enhanced Transparency and Monitoring: Post-acquisition, Cantor may demand more frequent reporting, audits, or escrow arrangements for suspect assets.

• Investor Pushback: Clients of the affected funds could demand clarity or even withdraw funds if they feel concentration risk was underestimated.

Broader Implications

• The incident underscores concerns about private credit and invoice finance exposures, especially when tied to companies with suspect accounting or opaque 

• It could slow mergers or acquisitions in the asset management space, if buyers are wary of undisclosed exposures.

• Regulatory bodies may tighten requirements around disclosure of off-balance sheet liabilities, supply chain financing, and collateral arrangements.

Bottom Line

Cantor Fitzgerald, in acquiring UBS’s O’Connor unit, may now need to revisit deal terms in light of the First Brands exposure. The size and nature of that exposure introduces risks—financial, legal, and reputational that weren’t fully anticipated. How UBS and Cantor manage the fallout could set precedents for how similar deals address hidden private-credit risk in the future.