Here’s what you need to know:
- PGI Northstar, a wholly owned subsidiary of Premium Guard Inc., signed a purchase agreement with First Brands for intellectual property from filters and plugs, wipers and Strongarm business lines for $25 million plus additional payments tied to net sales.
- NOCO, another aftermarket company, says it was denied the opportunity to bid on intellectual property related to wipers.
- U.S. Bankruptcy Judge Christopher Lopez gave NOCO 48 hours to put a competing bid on the table, saying he had no evidence that such an opportunity would cause PGI to back out.
U.S. Bankruptcy Judge Christopher Lopez gave aftermarket company NOCO until Friday morning to submit a competing bid for intellectual property related to First Brands’ wind down of business after declaring Chapter 11 bankruptcy.
First Brands has an offer on the table from PGI Northstar, a subsidiary of Premium Guard Inc., for $25 million for intellectual property from the filters and plugs, wipers and Strongarm business lines to PGI in late March. The deal is worth $25 million plus certain assumed liabilities and a portion of net sales worth, First Brands estimates, about $20 million over time.
[RELATED: Court filings detail alleged wrongdoing in First Brands’ collapse]
“I don’t have any evidence they’re gonna walk,” Lopez said at a hearing on Tuesday. “So I’m going to give you 48 hours. … These assets have to be sold.”
The PGI deal includes:
- FRAM.
- LuberFiner.
- PetroClear.
- Autolite.
- Champ.
- Champion Lab.
- Trico.
- Anco.
- ExactFit.
- Strongarm.
- MightyLift.
- AVM.
None of those businesses are operating, First Brands says. The company filed for bankruptcy in September and, facing a liquidity crisis earlier this year, rapidly wound down businesses not kept afloat by OEMs seeking to maintain a steady supply of parts for their vehicles. Business lines not covered by OEMs shuttered their plants and laid off more than 3,000 employees. First Brands maintains the longer the business lines are shut down, the less valuable they become.
PGI’s lawyer, Jordan Leu, said in court there was a customer issue in play as well. While PGI can call off the sale if it doesn’t close by April 17, according to the agreement, an unspecified major customer in one of the business lines has threatened to take its business elsewhere if something isn’t decided soon.
Lopez asked Leu if PGI considers it an “all or nothing” sale. Leu says his client has not agreed to parcel anything out would need time to consider.
Andriana Georgallas, a lawyer for First Brands, called the PGI deal “the bird in hand.” She says First Brands was surprised at NOCO’s objection and even more so that it didn’t come with a proposal, bid or any other show of interest. Furthermore, PGI is a known player in the aftermarket, Georgallas says, that is familiar to customers and to debtors.
“We don’t believe NOCO has standing to be here,” she says, pointing out that it’s not a First Brands creditor. “They allege collusion and bad faith, and those are not the grounds here.”
First Brands, under the auspices of the U.S. Bankruptcy Court for the Southern District of Texas, began exploring sales of its businesses earlier this year. NOCO, a family owned company headquartered in Cleveland that develops and manufactures, among other things, battery chargers and components, objected to the sale. It says it was not offered an opportunity to bid on intellectual property from Trico’s wiper business despite expressing interest.
Jon Pinney, counsel for NOCO, said in Tuesday’s hearing the company is ready to do business, in cash, for the wipers business’s intellectual property. He says the fact NOCO was told IP offers were not yet under consideration by First Brands’ investment banker, Lazard Freres & Co., “warrants reconsideration of the process.”
NOCO’s objection
NOCO says it was one of more than 190 potential buyers contacted by Lazard regarding selling off assets in January. It maintains it was prepared to proceed with a purchase, pursuing financing and doing due diligence on Trico and its facilities, including arranging travel and reviewing appropriate data.
“Lazard eventually advised NOCO that an acquisition of Trico would require a purchase price near $150 million and involve the assumption of approximately $58 million in liabilities, without including global intellectual property,” the objection says. “NOCO determined — based on the diligence it had conducted — that any offer it could responsibly submit would not be commensurate with that valuation and therefore did not proceed with that specific transaction. However, NOCO expressly stated that it remained interested in purchasing the Trico IP, which (First Brands) now propose to sell for pennies on the dollar.”
NOCO says it was never provided notice that an IP-only sale was a possibility despite expressing interest as late as March 24, the day before the emergency sale request to PGI was filed with the court.
First Brands’ response
First Brands says the PGI deal was “the culmination of several months of good faith negotiations between the parties, in consultation with (First Brands’) stakeholders, and will yield $25 million in cash consideration at closing plus certain royalty payments that (First Brands) believe may have a value of up to $20 million on a present value basis.”
Furthermore, the company says its creditors approve of the sale to PGI and that the IP assets are more valuable packaged together. NOCO, it says, failed to produce a bid for Trico or any other assets. Eighteen other interested parties did submit bids, including on IP. It says the March 24 email to NOCO saying it would have the opportunity to bid on IP was sent in error by a Lazard employee unaware of the PGI deal. The email, with NOCO submitted with its objection, was sent by Lazard Vice President Rufaro Makanda.
Nathan Mooney, managing director in the restructuring and liability management group at Lazard, filed two declarations in support of the sale to PGI. In the supplemental declaration filed Tuesday, Mooney says he believes breaking apart the IP sale and remarketing the business lines “would not be in the best interests of the estates and that approval of the sale transaction is a reasonable exercise of (First Brands’) business judgment.”
Lazard fielded 43 inquiries into purchasing First Brands’ lines of business and 25 bids on going concerns. It was instructed by First Brands to prioritize going-concern bids over asset-specific bids, such as those for intellectual property. This included the successful sale of Walbro, concluded earlier this year and ongoing efforts to sell Horizon, pumps businesses and Toledo Molding & Die.
First Brands settles pair of suits
Two claims against First Brands were settled this week. One was a union grievance against Toledo Molding & Die (TMD) by Abigail Vore and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW Local 2021.
In that complaint, Vore and the union alleged TMD denied a life insurance claim relating to an employee, Marcus Munson. The union filed a grievance on Oct. 9, just after First Brands filed for bankruptcy. U.S. Bankruptcy Judge Christopher Lopez signed the settlement April 6, giving Vore $45,000 in exchange for the union dropping the grievance. TMD did not admit liability.
A second agreement signed by Lopez on April 6 settled a dispute between Tonya Gallegos and FRAM Group Operations. Gallegos filed a charge with the U.S. Equal Employment Opportunity Commission against FRAM. FRAM disputes the charges, but offered Gallegos a $30,000 settlement, which she accepted. That includes $12,000 for lost wages, $12,000 for non-wage compensatory or liquidated damages, and $6,000 for attorney’s fees and costs.
