Apollo Sidestepped Blacklist to Short Ailing First Brands’ Loans

Long before being pushed to the brink of bankruptcy by concerns over its financial reporting, First Brands Group LLC took steps to keep Apollo Global Management Inc. at bay.

The embattled auto-part supplier, which has come under scrutiny for its use of complex off-balance sheet financing, had included Apollo and its affiliates in a blacklist that barred certain firms from trading its loans.

While that may have seemed like enough to stop Apollo from taking out a short position on First Brands’ debt, the New York-based firm found a workaround.

For a year — and until it recently closed the ...