Here's what you need to know
- U.S. Bankruptcy Judge Christopher Lopez says he'll sign $80 million deal to sell Toledo Molding and Die business to a JVIS affiliate.
- Certain creditors agreed to the deal provided they got a share of the proceeds.
- Some creditors are objecting to the compressed timeline offered in a Chapter 11 exit plan filed last week by First Brands. They say it favors some creditors over others while First Brands argues it will soon be out of money to continue the cases.
Bankruptcy Judge Christopher Lopez signed off on the sale of First Brands company Toledo Molding and Die (TMD) to TNJ Ohio, an affiliate of JVIS, a Michigan-based automotive components company.
The deal will bring First Brands close to $80 million. In turn, the company will turn those proceeds over to creditors and pay administrative expenses. As part of the deal, TNJ will take over certain contracts and leases from First Brands.
[RELATED: Some First Brands employees get temporary reprieve from job loss]
Certain creditors signed off on the deal under the condition they received a negotiated minimum amount of aggregate proceeds. These include the ad hoc group of lenders, some secured lenders and Onset.
Lopez says the sale makes sense, and as soon as First Brands and its creditors work out the details, he'll sign the order. Among the objections raised and resolved were:
- Incorrect amounts owed to utility providers, suppliers and others.
- Contractors asking to be removed from the deal with TNJ Ohio.
- Real estate issues and union agreements.
The sale is expected to close by the week's end.
First Brands hitting another liquidity crisis
Charles Moore is the interim CEO of First Brands. He says First Brands have experienced severe and persistent liquidity constraints since the Chapter 11 cases were filed in September. As the companies collapsed in the wake of the fraud indictments of former executives in January, OEMs stepped forward to keep some of its lines of business afloat, including TMD. Without that support, Moore says, First Brands would be hard-pressed to continue the Chapter 11 cases.
[RELATED: Court-appointed examiner reveals findings in First Brands bankruptcy]
"The debtors' existing liquidity is insufficient to sustain these Chapter 11 cases," Moore says in a declaration supporting a Chapter 11 plan First Brands recently filed with the court. After the TMD sale and two other sales the company hopes to close soon, Moore says OEM funding will cease.
"Based on my team's review of the debtors' current cash position and projected expenditures, the debtors' available liquidity would be exhausted less than two weeks after OEM funding ceases," Moore says. "If the debtors do not move expeditiously toward confirmation (of the Chapter 11 plan), I believe the debtors will be forced to pivot to a value-destructive conversion to Chapter 7."
But the Chapter 11 plan, even though it has the support of some of the creditors, has rankled others. Evolution says First Brands owes it possibly as much as $290 million. It says the Chapter 11 plan and associated disclosures as filed favor certain lenders over others.
"These Chapter 11 cases have been circling the drain since shortly after the petition date, as the debtors have only further destroyed value post-petition, failed in their efforts to sell their assets as a going concern, and accrued astronomical administrative expenses," Evolution says in an objection to the plan it filed Tuesday. "These cases are in desperate need of a prompt resolution, whether through conversion and liquidation, or through an orderly Chapter 11 plan involving the input of all of the debtors' impaired creditors. The plan (as filed) does neither."
