Trade finance company Raistone has requested a court to appoint an independent examiner to investigate the bankruptcy of First Brands, a U.S. auto parts supplier. Raistone, a creditor of First Brands, alleges that as much as $2.3 billion has “simply vanished” from the company. First Brands filed for bankruptcy protection last month following investigations into irregularities in its financial reporting. The company, which produces automotive replacement components, has reported total liabilities of $11.6 billion, according to court documents. Raistone provides supply chain finance solutions, assisting businesses in optimising their cash flow and managing risk. Essentially, they provide businesses with the capital they need to operate and grow.
The collapse of First Brands has unsettled debt investors, raising concerns about broader stress within corporate debt markets, particularly in private credit. According to the filing submitted to the Texas Southern Bankruptcy Court, Raistone stated that, under the current circumstances, with up to $2.3 billion in assets unaccounted for, the appointment of an examiner to conduct an independent investigation is both mandatory and critical to maximizing recovery for creditors. First Brands had previously appointed a special committee of independent directors to investigate its off-balance-sheet financing and whether invoices were factored more than once.
First Brands believed it had an unpaid $2.3 billion hole on its balance sheet related to third-party factoring arrangements when it filed for Chapter 11 proceedings. Factoring is a financing method where companies sell outstanding customer invoices to investors for cash. The company allegedly collected roughly $1.9 billion of factored receivables without remitting the funds to the proper owners, according to the filing. Following First Brands’ bankruptcy filing, Raistone questioned whether the company had actually received $1.9 billion and requested information about the amount in segregated accounts related to the factored receivables. First Brands’ lawyer responded that they did not know if the company had received the funds and that the segregated accounts held $0.
Raistone has expressed concerns about the thoroughness of First Brands’ internal investigation, deeming it “highly questionable”. Other firms are also feeling the fallout of First Brands’ bankruptcy. Jefferies revealed that Leucadia Asset Management has approximately $715 million in receivables linked to First Brands Group. UBS also stated that it is evaluating the situation, noting exposure of over $500 million to the auto parts maker.
