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Investors in the $2tn leveraged loan market have warned that the abrupt collapse of First Brands Group is an early sign of trouble for a market where hasty deals and hurried due diligence have become commonplace.

First Brands was among the largest issuers of loans bought by collateralised loan obligations, investment vehicles that buy up small slices of hundreds of individual corporate loans.

CLOs have become popular with insurers and other big investors who bet that by spreading their lending across many different companies they are protected from the pain of defaults in one or two businesses.

But the rapid bankruptcy of First Brands, a maker of antifreeze, windshield wipers and brake pads, has raised concerns over the rapid growth of the CLO market, which has provided almost unquenchable demand for the leveraged loans that private equity firms often use to finance their acquisition sprees. Some fund managers worry that a spate of CLO losses could cause Wall Street’s securitisation machine to sputter.

“Inside credit markets for more than a year, there has been a grudging recognition that there was and is a series of credit problems that could be substantial and could be dangerous to the overall economy,” said Andrew Milgram, chief investment officer of Marblegate Asset Management, a distressed-debt investor.

First Brands’ downfall, just weeks after subprime auto lender Tricolor filed for bankruptcy amid allegations of fraud, has stoked concerns that the failures are unlikely to be isolated incidents.

“You’re not paid to do due diligence in this market,” an executive at a former lender to First Brands said.

First Brands had issued more than $5bn of senior and junior loans, which were bought up and held in dozens of CLOs issued by asset managers including PGIM, Franklin Templeton, Blackstone, CIFC, Oaktree and Wellington, according to a Morgan Stanley analysis.

Most of those vehicles have already realised their losses, selling out of the loans as First Brands’ problems came to light over the past two weeks. The loans are now changing hands at just cents on the dollar, with an implied loss of more than $4bn.

Those losses will principally hit the returns of CLO equity holders, which includes the managers of the structured credit vehicles themselves. CLOs are often 10 times leveraged, with $50mn of equity supporting a $500mn loan portfolio, for example. Defaults such as First Brands’ cut into that equity cushion, which exists to take the first loss and protect higher-rated investment grade tranches of the CLO.

Trading of those equity tranches is opaque, but investors said they had not yet seen money managers dumping those positions in secondary trades.

The sell-off in First Brands debt has started to weigh on the broader market, with PitchBook LCD data showing the US leveraged loan market is on pace for its biggest monthly loss since 2022.

“The two successive defaults of [First Brands] and Tricolor Auto brought into highlight potential irregularities and underwriting challenges in the credit market,” Bank of America strategist Pratik Gupta said. “The market has started to take a dim view of credit fundamentals.”

Despite the troubles at First Brands and Tricolor and pockets of weakness starting to appear in the US economy, the strong demand for higher-yielding investments such as leveraged loans has kept spreads on risky corporate debt at near-record low levels.

Leveraged loan issuance hit a record in the third quarter at $404bn, according to PitchBook LCD. However, investors say this feverish pace of issuance has meant deals — which a few years ago may have taken weeks or more to line up — are now often raced through.

When First Brands raised more than $750mn in March 2024 to fund an acquisition, it announced it was in the market for the debt financing on a Monday morning. Investors were allocated the loans before lunch on Friday of the same week. In total, more than 80 CLOs were exposed to First Brands, bankruptcy filings showed.

Demand has persisted despite some of the worst investor protections on record, according to Covenant Review. Lawyers for the industry say they have little power to push back against weak protections when willing buyers are so numerous.

First Brands debt offered attractive rates, with an interest rate 5 percentage points over the floating rate benchmark for the US dollar loans it issued in March 2024. When accounting for discounts investors received at the time of the capital raise, the loans yielded roughly 11 per cent.

Investors who have suffered losses on the loans say due diligence was not made a priority, with some investors taking comfort from the fact that larger managers with bigger teams of credit analysts had bought in.

But others saw red flags they said steered them away from the debt. The company was perpetually buying up smaller businesses and raising more debt to fund those takeovers. Investors said that made it difficult to assess how the underlying business was faring. Others pointed to the difference between the cash flows that First Brands generated and the profits it reported it was earning.

“Everything was adjusted,” one investor who decided against investing in First Brands debt said, referring to its profit statement. “Nothing tied to cash so it was virtually impossible” to analyse.

Josh Easterly, the chief investment officer of investment group Sixth Street, pointed to the fact that many CLO investment firms have just a handful of analysts covering their entire credit portfolios, which can include hundreds of different investments. Moody’s estimates roughly 2,000 companies issue debt that is bought by CLOs in the US.

“When the tide goes out . . . things are going to come out,” Easterly said, noting that investors would see “who has done their work and who hasn’t.”

While defaults in the leveraged loan market have picked up this year from 2024, the pace remains low by historical standards, according to PitchBook LCD data. But concerns about the lack of due diligence in a frothy market are starting to mount.

“With [Tricolor] and First Brands, the problems of the credit market are starting to percolate into the general Wall Street psyche,” Milgram said. “Are we entering a period where those [CLO market’s] assumptions will be tested?”

The top-rated AAA tranches in CLOs have proven their mettle during prior market sell-offs and economic downturns, given how diversified the vehicles are. Investors said defaults would need to rise dramatically to begin to impair investors in even the lower-rated portions of the vehicles.

Money managers are nonetheless keenly aware of the problem that First Brands might cause the broader market.

Asset manager Silver Point this month began the marketing of its first euro CLO by highlighting one point in investor materials seen by the FT.

It said: “Silver Point has zero First Brands exposure.”

Additional reporting by Robert Smith

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Venture Global is seeking to quell accusations from major energy clients that it plans to sell liquefied natural gas cargoes on spot markets rather than honouring supply contracts from its new export terminal in Louisiana.

The US LNG supplier wrote to clients on Thursday affirming its commitment to deliver on contractual obligations, after selling more than 100 cargoes from its Plaquemines facility before having declared it operational. Such a declaration triggers legal obligations to begin delivering on contracts.

The customers are fearing a repeat of Venture Global’s conduct when it launched its first facility, Calcasieu Pass, from which it sold more than 400 cargoes on spot markets before fulfilling deliveries to customers. The move has led to growing legal and financial pressure on the group after an international arbitration panel ruled last week that the company breached its obligations.

In a filing to US regulators last month, Venture Global requested a delay of its in-service date for Plaquemines by several months to the end of 2027, raising concerns among customers that the company could delay supplying cargoes to them as it did at its Calcasieu Pass facility.

In that case, the company declared force majeure on its contractual commitments in March 2023 on the grounds that the Calcasieu Pass facility’s power supply equipment needed repair, even though it was able to supply cargoes to the spot market amid a price surge following Russia’s invasion of Ukraine.

Spot markets are again priced far higher than long-term supply contracts would fetch.

Saul Kavonic, head of energy research at MST Marquee, said: “Venture Global stands to make over double the revenue by selling cargoes on the spot market compared to selling under their long-term contracts.”

The clients are so-called foundational customers, whose long-term contracts enable Venture Global to raise the money to build its LNG terminals.

Last week the International Chamber of Commerce found Venture Global breached its obligations to BP by failing to deliver cargoes from Calcasieu Pass. It now faces damages claims worth more than $1bn from the UK oil major, as well as four additional arbitration cases filed by customers that could lead to similar judgments.

Rating agency Fitch on Thursday revised its outlook on the company to “negative”, from “stable”, saying “any significant damages are likely to further pressure the company’s financial position in a period of elevated leverage”.

Venture Global’s request for an extension of its in-service date for Plaquemines, which the Federal Energy Regulatory Commission approved on Thursday, prompted two customers, Chevron and Orlen, a Poland-based energy company, to ask the regulators to intervene in the case.

Orlen, which is one of Plaquemines largest customers with a contract to buy 4mn tonnes of LNG a year, said it had “concerns regarding the intentions of Plaquemines parent company” in its submission to US energy regulators.

Shell, also a foundation customer, told the Financial Times it was “closely monitoring activities at the Plaquemines facility to ensure adherence to our contracted commercial operation date”.

When contacted for comment about its letter to customers, Venture Global said its recent filing to US regulators requesting a delay of its in-service date for Plaquemines to the end of 2027 would not change the date it would begin shipping cargos to long-term customers.

“Our request for an extension is a case of aligning our permits with our actual construction schedule,” it said. “To be clear, this request will have no impact on our expected commercial operations date, which remains unchanged from what has been communicated and agreed upon with our customers.”

Researchers at Embry-Riddle Aeronautical University and Brazil’s Instituto Tecnológico de Aeronáutica (ITA) will combine forces on one of the main challenges of electric aircraft — controlling the heat spikes they generate at takeoff.

The collaboration is supported by a $450,000 National Science Foundation International Research Experiences for Students (NSF IRES) grant.

“Both sides have been working on the heat management challenge, so there are some real synergies,” said Dr. Sandra Boetcher, the interim department chair and professor of Mechanical Engineering  and principal investigator on the project. Boetcher is working with co-principal investigator Dr. Mark Ricklick, associate professor of Aerospace Engineering, as well as Brazilian colleagues Dr. Guilherme Borges Ribeiro and Dr. Elisan dos Santos Magalhães.

The collaboration is intended to offer hands-on research training to students, preparing them to tackle the issue of heat management on electric aircraft, considered key to reducing the aviation industry’s carbon footprint. The project will involve three cohorts of five Embry-Riddle students over the next three years spending eight to ten weeks between May and August in Brazil at ITA.

Boetcher said the heat management research that she and Ricklick undertake tends to be fundamental, developing prototypes, for example, that can be further tested. Similar research out of ITA, which is affiliated with the Brazilian Air Force and the Brazilian multinational aerospace corporation Embraer, tends to be applied.

One of the main technologies the researchers from both countries are exploring relates to phase-change materials, which convert from a solid to a liquid at certain temperatures and are capable of absorbing large amounts of heat during the process.

Drs. Sandra Boetcher and Mark Ricklick, standing in front of an aircraft turbine, received a $450,000 NSF grant to offer a student research collaboration with Brazilian colleagues on heat management of electric aircraft. (Photo: Sandra Boetcher)In a phase-change process, energy, in this case heat, is expended on overcoming the molecular forces holding a solid structure together, changing the material to a liquid. No temperature rise occurs during the change. This happens in everyday phase changes, Boetcher explained.

“It’s like you’re melting an ice cube,” she said. “The ice cube is melting, but the temperature stays the same,” until the ice cube becomes water and the water’s temperature starts to climb.

The phase-change materials being investigated by the researchers capitalize on the phenomenon and can be applied as a slab under an aircraft’s electrical circuit to keep it under a certain temperature.

Modeling to optimize the performance of phase-change materials with computer simulations can be time-consuming, with computational fluid dynamics problems taking as long as two weeks to solve.

Magalhães brings coding expertise that could “speed up the process of solving the problem,” Boetcher said.

The researchers will also look at other technologies to manage heat in electric aircraft, including ones that could provide active cooling rather than passive heat absorption.

Boetcher said she thinks the students who travel to Brazil will benefit deeply, even apart from participating in the technological innovations that could result.

“It’s dealing with other cultures, with other collaborators, how they view things, how they operate, how they work,” she said. “There’s a lot of maturing when you get to have these opportunities abroad.”

Dr. Jeremy Ernst, vice president for research and doctoral programs, further emphasized the value of the collaboration.

“The IRES program is impactful in creating research exposure and authentic international experience,” Ernst said. “The work led by Dr. Boetcher and Dr. Ricklick is of high value to students, offering enhanced cultural immersion in Brazil within its rich aviation and aerospace environment. This experience allows students to develop skills that are directly transferable to the global workforce.”

Vietnam’s upgrade to Emerging Market status by FTSE Russell is a green flag for global investors and a step towards greater financial market integration. The 2025-2027 reforms can translate into easier capital access and disclosure transparency for businesses looking at a long-term foothold in Vietnam.

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FTSE Russell announced on October 7, 2025, that Vietnam will be upgraded from Frontier to Secondary Emerging Market (EM) status, from September 21, 2026, after a final review scheduled for March 2026. The decision comes after nearly seven years of gradual reform since Vietnam was first placed on the FTSE watchlist in 2018.

Vietnam’s upgrade to Secondary Emerging Market status places it alongside China, India, Indonesia, the Philippines, and Qatar. It ranks below Advanced Emerging Markets such as Thailand and Malaysia, and Developed Markets like Singapore.

Understanding the FTSE classification and upgrade process

FTSE Russell’s Equity Country Classification Framework evaluates markets based on a set of quantitative and qualitative indicators that measure openness and regulatory quality.

The Secondary Emerging Market status hinges on countries satisfying these primary criteria:

• Market accessibility for foreign investors;
• Settlement and custody infrastructure;
• Transaction transparency and liquidity; and
• Market size, free float, and institutional participation.

Vietnam successfully met all these conditions and addressed many longstanding barriers that were limiting investor participation. The country addressed two critical technical barriers that previously prevented the upgrade, including:

• Settlement cycle and pre-funding requirements

In November 2024, the Ministry of Finance issued Circular 68/2024/TT-BTC, which introduced the Non-Pre-funding Solution (NPS) model. Before, foreign institutional investors were required to fully pre-fund equity purchases before execution, a rule that discouraged global funds accustomed to T+2 settlement systems. Under the NPS, securities firms now bear the responsibility of assessing and managing payment risk under the contracts.

• Failed trade processing mechanism

Vietnam implemented a mechanism for handling settlement failures to improve transparency in post-trade activities. It ensures the timely resolution of settlement failures and brings Vietnam’s back-office procedures closer to international standards.

Interim review and pending conditions

Although Vietnam has met the requirements for EM classification, the March 2026 interim review will evaluate one remaining area, which is direct access for global brokerage firms.

FTSE Russell noted that this is not a mandatory criterion for maintaining EM status, but it remains crucial for Vietnam’s index and for aiding participation by major global institutional investors.

Projected capital inflows and portfolio effects

The upgrade is expected to catalyze a lot of foreign capital inflows. Analysts have made various investment projections, some of which like:

• FTSE Russell estimates inflows of around US$6 billion from passive index trackers that replicate the FTSE Emerging Market Index;
• The World Bank projects short-term inflows of approximately US$5 billion before and after the upgrade from passive and active investors, and long-term potential inflows could reach $25 billion by 2030; and
• HSBC forecasts range from US$3.4 billion (active funds) to US$10.4 billion (total including passive funds).

Vietnam is expected to account for approximately 0.5 percent of the FTSE Emerging Market Index once the reclassification takes effect.

Active fund participation

According to HSBC, approximately 38 percent of Asia-focused funds and 30 percent of global emerging market funds already hold Vietnamese equities, which suggests that beyond passive index flows, Vietnam could attract new active fund allocations too.

Liquidity, valuation, and trading depth

Vietnam’s stock market has demonstrated strong liquidity in 2025. In July 2025, average daily trading volume reached over 1,422 million shares as average daily turnover reached VND 34,993 billion (US$1.32 billion). The market hit historic liquidity records with total trading value on the Ho Chi Minh City Stock Exchange (HOSE) as it approached VND 78.2 trillion (US$2.9 billion) in early August 2025. As of May 2025, Vietnam Exchange posted nearly US$18 billion in monthly trading value, overtaking Malaysia (US$12.1 billion) and Indonesia (US$15.3 billion)

Anticipation of the FTSE announcement has already influenced domestic equity performance. The VN-Index has risen from 1,100 points in April 2025 to nearly 1,700 points by October 2025, which is a 50 percent jump and a 33 percent year-to-date gain; thus, Vietnam has become the best-performing market in Southeast Asia.

HSBC analysts, however, caution that front-loading, the tendency of investors to buy in anticipation of future reclassification, may limit further short-term upside. Profit-taking could occur after the announcement, as observed in other markets following index upgrades. Nevertheless, most research expects active funds to disburse gradually between March and September 2026.

Domestic reforms enabling the upgrade

Vietnam’s reclassification is a cumulative result of regulatory and structural reforms that have improved its foreign access.

Central counterparty and post-trade reforms

The State Securities Commission (SSC) has given a roadmap to launch a central counterparty (CCP) system for Vietnam’s equity market by Q1 2027. Milestones on the way are:

• Q1-Q2 2026: SSC and the Vietnam Securities Depository and Clearing Corporation (VSDC) will issue a new circular to replace Circular 119/2020/TT-BTC on registration, custody, and settlement;
• Q3 2025-Q1 2026: Establishment of a VSDC subsidiary to handle CCP functions;
• Q3 2025-Q4 2026: Introduction of a revised accounting framework to replace Circular 89/2019/TT-BTC;
• 2026: IT system upgrades, staff training, and simulation testing; and
• Q1 2027: Full-scale operation of the CCP.

CCP will help foreign institutional investors reduce currency risk during the payment cycle and provide safer mechanisms against payment risks.

Technology infrastructure modernization

Vietnam launched the KRX trading platform on May 5, 2025, in partnership with the Korea Exchange (KRX). The platform addresses several bottlenecks and expands derivative products available to investors with these new features:

• Same-day trading (T+0) and short selling;
• Faster settlement processing; and
• Support for options contracts and CCP clearing.

Disclosure and transparency

From January 1, 2025, all VN30 companies (the 30 largest listed firms) have been required to publish disclosures in Vietnamese as well as English. By the end of 2026, all approximately 2,000 listed and registered trading companies must complete the transition to English-language disclosures. Currently, only about 25-30 percent of listed companies provide complete English disclosures.

Other reforms

Other transformative reforms include:

• Removal of pre-funding obligations: As noted above, Circular 68/2024/TT-BTC eliminated the full pre-funding requirement for foreign investors.
• Foreign ownership liberalization: Decree 245/2025/ND-CP, issued on September 11, 2025, removed provisions that allowed listed companies to set foreign ownership limits below the legal maximum. All public companies must now publicly disclose their maximum allowable foreign ownership ratio within 12 months of the decree’s coming into force.
• Simplified trading code issuance: Foreign investors can now receive an electronic securities trading code (ESTC) and commence trading immediately without submitting physical paperwork.
• Accelerated IPO and listing timelines: The period for securities to be traded after listing approval was shortened from 90 days to 30 days, and the overall listing process was reduced by 3-6 months.

Remaining reform gaps

Despite its upgrade, Vietnam continues to face structural challenges that must be addressed to sustain investor confidence.

• Currency convertibility: The Vietnamese Dong is not freely convertible and cannot be remitted overseas. Foreign exchange transactions remain subject to State Bank of Vietnam (SBV) controls.
• Global broker access: The March 2026 interim review will specifically assess progress in this area.
• ESG disclosure: Only 25 percent of listed companies publish environmental, social, and governance (ESG) reports, most without external assurance.

Integration with global finance

The FTSE upgrade is a part of a series of efforts Vietnam is taking for global financial integration and capital market openness. Vietnam’s Finance Minister Nguyen Van Thang stated that “the official recognition and upgrade of Vietnam’s securities market is clear evidence of the country’s sound development path and its growing capacity to integrate deeply into the global financial system”.​

The government has set an ambitious target of 8 percent GDP growth for 2025 and aims to achieve double-digit growth between 2026 and 2030. The present roadmap for Vietnam’s stock market development goes up to 2030. The market can aim for medium-term targets for MSCI Emerging Market upgrade between 2026 and 2027 and can have long-term goals for FTSE Advanced Emerging Market status by 2029 and 2030.

Monetary and currency management

Vietnam’s GDP growth recorded an 8.23 percent year-on-year rise in Q3 2025, the fastest since 2022. The Purchasing Manager’s Index was 50.4 in September 2025, and total trade volume reached US$680 billion, with exports up 14.8 percent to US$262.44 billion.

The SBV maintains an inflation target of 4.5 percent for 2025. As of mid-year, consumer prices rose 3.27 percent, and core inflation stood at 3.16 percent. Refinancing rates remain at 4.5 percent (at an accommodative policy stance).

The Federal Reserve’s rate cuts in 2025 have provided room for Vietnam to maintain low domestic interest rates without pressuring the dong. As we noted, the Vietnamese Dong is not freely convertible as foreign exchange transactions still are subject to SBV controls.

Vietnam’s sovereign credit ratings remain below investment grade but stable:

• Standard & Poor‘s BB+ with stable outlook (affirmed August 2025);
• Fitch’s BB+ with stable outlook (affirmed June 2025); and
• Moody’s: Ba2 with stable outlook (unchanged since 2022).

The EM reclassification could fuel investor appetite for Vietnamese sovereign bonds, which could potentially lower long-term borrowing costs. Vietnam now stands at the threshold of deeper global integration. Despite global headwinds, Vietnam’s domestic reforms and foreign investors’ belief in its robustness can provide a much-needed boost for double-digit growth.

Read more: Vietnam’s Rising Purchasing Power: 2024 Household Living Standards Survey

(US$1 = VND 26,349.5)