Here's what you need to know
- First Brands says there are two deals afoot to sell remaining business lines Toledo Molding & Die, Horizon North America and ASC.
- The Toledo Molding & Die deal could save around 600 jobs and generate $79 million for First Brands, who owes creditors billions. Former executives of the company have been indicted in a fraud scheme that prosecutors say siphoned billions out of the company and into personal bank accounts.
- Lawyers are now fighting over who gets paid as First Brands battles through a complex Chapter 11 bankruptcy case.
First Brands Group reached an agreement to sell Toledo Molding & Die (TMD) to TNJ Ohio, an affiliate of JVIS, a Michigan-based automotive supplier.
The deal would generate $79.8 million, much of which would be distributed to First Brands' creditors, with some going to professional fees and services related to the sale. TMD makes plastic components such as fluid reservoirs and other injection molded solutions. JVIS makes interior and exterior automotive components as well as parts for drones and water heaters.
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"Debtors have no practical alternative but to seek approval of the sale transaction on an expedited basis," says Charles Moore, interim CEO of First Brands. "With each passing week, customer and vendor confidence continues to erode, operating costs and expenses increase and employees face growing uncertainty regarding the future of the plants and facilities at which they work."
The buyer expects to extend job offers to around 600 TMD employees, court documents say. Also in the court filings are clues that another sale may be forthcoming, this time of First Brands' Horizon North America and ASC business lines.
Horizon North America makes towing, hitch and trailering accessories under the Horizon, Reese, Tekonsha, DrawTite, Bargman, Fulton and Bulldog brands. ASC makes water pumps and related systems and components.
"Sale agreements for Horizon North America and ASC are in process and the debtors anticipate seeking approval of the same in the near term," a motion for a hearing on the TMD sale says.
A ruling on the TMD may come as early as next week.
Chapter 11 plan
First Brands also filed a plan to wrap up its Chapter 11 cases. The company entered bankruptcy in September and former executives were indicted on sweeping federal fraud charges in January. They include former CEO Patrick James and his brother Edward James. Former executives Stephen Graham and Peter Andrew Brumbergs have pled guilty and are cooperating with prosecutors.
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In court on Friday, lawyers for First Brands and creditors hashed out disagreements related to the Chapter 11 plan, including which creditors will get paid and when. Counsel for creditors called First Brands' Chapter 11 plan "novel and interesting," and while no issues were decided on Friday, several disagreements bubbled to the surface.
Allan Brilliant, an attorney for lenders related to the special purpose financing entities Carnaby II and III, is concerned about the timing of the plan. He says his clients are continuing negotiations with other lenders, and that "we're still hopeful we'll be able to get something resolved."
"I think we're pretty close," he says, adding there are concerns about the value of the inventory his clients say secure their loans diminishing.
Dan McGuire, attorney for Bank of America, says the timing is a factor of First Brands' liquidity.
"This company is on a very short leash in terms of liquidity and that's not going to change," he told the court. "The show needs to get on the road ... or the liquidity is not going to be there."
The sheer size and complexity the case is posing its own challenges.
Robert Stark, an attorney for the committee of creditors, says he and his team have spent three months trying to come to a solution in this case. However, he's coming to the realization "the fraud is too pervasive" in what he called the impossible bankruptcy case. There's $12 billion in financing strung over more than 90 creditors with no money coming in and millions in administrative expenses racking up every month.
[RELATED: Court filings detail alleged wrongdoing in First Brands’ collapse]
Sean Scott, attorney for creditor Katsumi, says process matters and the liquidity issues First Brands is experiencing weren't unexpected. He advocated against the Chapter 11 plan's compressed timeline, saying he and his clients "shouldn't have to act in an informational advantage."
AnnElyse Gianes, is an attorney for the ad hoc committee of creditors.
"These cases have been on the precipice of final deal progress for months," she says, pointing out that First Brands is suffocating under massive fraud and saying her clients have given up substantial rights in the name of coming up with an equitable plan as possible.
"Every dollar spent in this courtroom and every minute in this courtroom is a dollar and a minute not spent prosecuting fraudsters," she says. "We have reached a breaking point."
Although U.S. Bankruptcy Judge Christopher Lopez didn't issue a ruling Friday on the plan, he did say he thought everyone should have plenty of time to review the plan and associated documents.
"I really want parties to think," he says. "I think the rules are going to have to be followed — at least 28 days to object to make sure parties have an opportunity to read and understand (the plan). I think parties are going to have to have time to read it."
Lopez says more hearings are scheduled in the case next week, including a new Chapter 11 plan coming on Monday.
