Auto Parts Maker First Brands Prepares for Bankruptcy Filing
Troubled Supplier Is Looking to Secure a Loan of at Least $1 Billion to Keep Business Running While It Reorganizes
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Troubled auto part supplier First Brands Group is preparing to file for bankruptcy as soon as next week and is looking to secure a loan of at least $1 billion to keep the business running while it reorganizes, according to people familiar with the negotiations.
The company’s bankers and creditors have been racing to find a way to restructure the company’s $6 billion in debt as investor confidence has deteriorated rapidly over the past two weeks.
Lenders have been discussing a so-called debtor-in-possession loan of about $1.25 billion that would allow the company to continue operating after it makes a Chapter 11 filing, though the situation is quickly evolving and the number, as well as the plans, may change, according to the people, who asked not to be identified discussing confidential negotiations.
Creditors initially expected that the company would need a loan of around $625 million, but the size of the loan has grown as bankers and lawyers have dug into the company’s finances, the people said.
First Brands did not respond to requests for comment after business hours.
The firm, whose brands range from Anco and Trico wiper blades to Fram filters, paused a refinancing effort in early August after investors asked questions about the company’s reliance on a financing method known as factoring that is used to turn promised revenue into immediate cash, Bloomberg reported.
S&P Global Ratings lowered First Brands’ credit rating to CCC+ from B+ on Sept. 22 and said it was concerned about the company’s negative cash flow in recent quarters, especially given the $4.5 billion in first-lien loans that are coming due in March 2027.
First Brands is owned by Patrick James, a businessman with a limited public profile. The company has grown through debt-funded acquisitions of products that are sold through mainstream retailers like Walmart and O’Reilly Auto Parts, according to Moody’s.
Walmart ranks No. 1 on the Transport Topics Top 100 list of the largest private carriers in North America.
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