First Brands Group is seeking court approval to access approximately $US600 million ($925 million) in bankruptcy financing to prevent the immediate shutdown of the auto-parts company. Lawyers for the firm argued during a court hearing in Houston that the funds, representing the remainder of a $US1.1 billion financing package, are crucial to the company’s survival. US Bankruptcy Judge Christopher Lopez previously authorised an initial $US500 million draw on the loan and is expected to rule on the current request. First Brands Group is a global automotive parts company that manufactures and distributes a wide range of products for the automotive aftermarket. The company provides replacement parts for cars, trucks, and other vehicles.
“We are talking high stakes, as high as they get,” said company attorney Sunny Singh during the hearing. Singh warned that if the judge rejects the financing package due to objections from holdout creditors, the firm would be forced to liquidate. First Brands has faced challenges in overcoming creditor objections, with accusations that the company has stripped them of their collateral rights in inventory and equipment without providing compensation, a violation of bankruptcy code standards.
Onset Financial Inc, a major creditor opposing the bankruptcy funding package, has accused First Brands of disregarding its collateral rights and urged Judge Lopez to deny the funding request. Attorneys for First Brands and competing creditors have announced agreements to postpone potential disputes over company invoices and other collateral pledged to lenders and firms involved with off-balance-sheet special-purpose vehicles.
First Brands lawyers also disclosed additional details regarding their investigation into the company’s past business practices and founder Patrick James, alleging that he misappropriated funds from the firm. James has denied these allegations.
