First Brands Wins Access to Last $600M of Emergency Funds
Company Warned It Would Liquidate Without the Money
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First Brands Group won access to $600 million of remaining bankruptcy financing, which company lawyers said was needed to prevent the company fromimmediatelyshutting down.
Judge Christopher Lopez approved the request on Nov. 7 during a bankruptcy hearing in Houston after First Brands restructuring advisers struck a series of settlements between the company and competing creditors. The funding represents the rest of the $1.1 billion financing offered by a group of company lenders.
First Brands lawyers warned that without the money, the auto parts supplier risked shutting down and liquidating. The company won access after reaching a series of agreements that essentially delay potential legal fights over invoices and other collateral that was allegedly double-pledged to senior lenders and other firms that had deals with off-balance-sheet special-purpose vehicles.
The new money comes at a cost, though, including a so-called roll-up of $3.3 billion in existing obligations. The controversial move pushes existing debt to the front of the repayment line in lockstep with newly lent money and it hasincreasinglybecome part of Chapter 11 financing.
Lopez said roll-ups on the scale First Brands requested aren’t typical, but “this is anything but a common case.”
Lawyers for the lenders have said the structure of the loan reflects how risky lending to First Brands is and havedescribedthe company as a “black box.”
In addition to making their case for the remaining funds, First Brands lawyers on Nov. 6 also described an investigation the company has undertaken, which resulted in a lawsuit earlier this week against founder Patrick James. It alleges James siphoned roughly $700 million from the business, an accusation he has denied.
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