The Hidden Risk Behind Recent Collapses: Why Data Integrity Matters in Credit

The sudden collapses of Tricolor and First Brands have shaken confidence across credit and structured finance markets. Both companies had strong institutional backing, audited financials, and steady funding relationships - yet both failed for the same underlying reason: data that investors and lenders could no longer trust.

‍

At first glance, Tricolor, a U.S. auto lender serving subprime borrowers, looked well-capitalised and growing. But during a recent review, its warehouse financiers uncovered major inconsistencies between the loan data reported and the actual collateral backing those loans. In some cases, the same portfolio of loans had been pledged to multiple financing lines - an issue that made it impossible to determine who held valid security. Once this came to light, credit lines were immediately frozen, liquidity evaporated, and the company filed for bankruptcy soon after.

‍

A similar story unfolded at First Brands, a global auto-parts manufacturer. The company had used complex receivables financing arrangements to improve cash flow, but its internal reporting overstated the value of invoices and receivables by billions. As external stakeholders began reconciling the data, large gaps appeared between what was reported and what actually existed. Within weeks, confidence in the company’s reporting collapsed - along with its access to capital markets - forcing an $11 billion bankruptcy and a wave of investigations into accounting and data irregularities.

‍

While the two businesses operated in different sectors, their downfall stemmed from the same issue: opaque, unreliable, and unverified data. In credit markets, where cash flows and collateral form the backbone of every structure, trust in the numbers is everything.

‍

How Shorooq Structures for Resilience

‍

At Shorooq, we take these lessons seriously. When Shorooq structures credit facilities, our focus is on ensuring that the information underlying each transaction is transparent, verifiable, and independently validated.

‍

Our structuring approach involves:

‍

• Data verification providers who validate reported portfolio information and reconcile it against third-party or system-generated records.
• Active review of data reported by servicers to confirm it accurately reflects loan or receivable performance and underlying cash flows.
• Independent oversight mechanisms - such as trustees, cash managers, and auditors - to provide additional layers of assurance.
• Continuous monitoring frameworks that detect discrepancies early and reinforce trust throughout the life of a facility.

‍

Conclusion

‍

The stories of Tricolor and First Brands are a reminder that even large, established businesses can fail when data transparency breaks down. At Shorooq, our philosophy is simple: a transaction is only as strong as the data behind it. By embedding independent verification and active oversight into every facility we structure, we help ensure that the numbers tell the truth — grounded in real, traceable cash flows and built on trust.

‍