First Brands says it needs $780 million or ‘it’s game over’

NEW YORK – First Brands Group lawyers said the auto parts company needs access to its roughly US$600 million (S$780 million) of remaining bankruptcy financing or it will have to shut down immediately.

That request, made during a Nov 6 court hearing in Houston, represents the rest of the US$1.1 billion financing being offered by a group of First Brands lenders.

US Bankruptcy Judge Christopher Lopez in October authorised the company to make an initial US$500 million draw on the loan, and a hearing to consider the current request will continue on Nov 7. 

“We are talking high stakes, as high as they get,” company attorney Sunny Singh said during the hearing. If the judge sides with holdout creditors and rejects the financing package, Mr Singh added that “it’s game over” and the firm will liquidate.

First Brands has struggled to overcome objections from creditors who accuse the firm of stripping them of their collateral rights in inventory and equipment without compensation, as the bankruptcy code typically requires. 

Onset Financial, one of the main creditors still fighting the proposed bankruptcy-funding package, accused First Brands in court papers of ignoring its collateral rights and urged Judge Lopez to reject the funding request.

Attorneys for First Brands and competing creditors have already announced deals that would, in essence, put off for a later day potential fights over company invoices and other collateral pledged to lenders and firms that had deals with off-balance-sheet special-purpose vehicles. Lawyers said they would continue negotiating settlements with key creditors before Nov 7’s hearing.

First Brands lawyers provided more details about their investigation into the company’s past business practices and founder Patrick James – whom they allege pilfered the firm of more than US$700 million. He has denied the allegation.

First Brands – which owns Fram, Trico and Raybestos among other brands – has entered into a common-interest agreement with a committee of company creditors as part of an ongoing investigation by an independent board committee, company attorney Matthew Barr said.

Advisers have established a whistle-blower hotline, collected more than seven million documents and interviewed current and former employees, and are pursuing records from more than 600 banks, he added.

The company has collected mobile phones, computers and other electronic devices for forensic imaging and placed “numerous litigation holds” on current and former employees, according to Mr Barr.

He went on to say that a review of First Brands’ operations, which employ roughly 26,000 workers globally, should be completed by the end of January. He said the effort will determine what units should be sold or shut down – including a German plastics business that filed for insolvency there earlier this week. BLOOMBERG