Federal Court Orders First Brands Liquidation as $1.1 Billion Rescue Loan Nears Zero
Updated
Updated · Financial Times · Aug 25
Federal Court Orders First Brands Liquidation as $1.1 Billion Rescue Loan Nears Zero
3 articles · Updated · Financial Times · Aug 25
Summary
$1.1 billion of debtor-in-possession financing backing First Brands is now expected to drift toward zero after a federal court rejected the company’s restructuring plan and ordered liquidation.
Roughly $200 million of asset sales exposed how little operating business remained, despite lenders initially betting the car-parts group’s brands and revenue base could support a turnaround.
Fraud allegations drove the collapse: the bankruptcy estate cited double-pledged collateral and fabricated invoices, while founder Patrick James awaits trial after pleading not guilty and other executives have pleaded guilty.
Nearly $2 billion of supplier claims, which rank ahead of the bankruptcy loan, consumed much of the estate, and the judge also blocked a plan to create more recovery room by buying insider-related lawsuits.
The wipeout leaves First Brands’ $9 billion of pre-bankruptcy debt worthless and stands out as a rare failure in distressed rescue lending, where senior bankruptcy loans usually recover strongly.