Here’s what you need to know:
- First Brands says it's close to selling two more of its lines of business, Horizon and Toledo Molding and Die. The move would save 1,600 jobs.
- Edward James, brother of First Brands' founder and CEO Patrick James, and a co-defendant in the criminal case in the Southern District of New York, had his bond modified to allow for travel, provided he notifies the court.
- Creditors are fighting to get in line over First Brands' remaining assets.
First Brands Group, the sprawling aftermarket company that has been in Chapter 11 bankruptcy since September after former executives allegedly leveraged the company and kept proceeds for themselves, says it's close to a deal to sell Horizon and Toledo Molding and Die as going concerns.
The sale would allow First Brands to save 1,600 jobs, a court filing says.
In a motion seeking more time to sort out the particulars of a Chapter 11 plan, First Brands says it's made significant progress, but still needs more time for an orderly reorganization of the business. It's reached a settlement with creditors to distribute value, it says, as well as a restructuring support plan.
[RELATED: Court filings detail alleged wrongdoing in First Brands’ collapse]
"The settlement, if implemented, will preserve and maximize the value of estate claims and causes of action by establishing a litigation trust funded with $25 million from the FBG debtors' balance sheet and additional capital that will be provided by certain DIP lenders," the filing says. "The settlement will also provide the opportunity for certain holders of claims against the FBG debtors to participate in recoveries realized by the litigation trust. Absent implementation of the settlement, these holders may not receive any recovery."
Earlier this year, First Brands sold Walbro for $50 million and the assumption of certain liabilities. Then, more recently, it closed a sale with PGI for some of its intellectual property (IP) related to the filters, plugs, wipers and lift arm businesses for $25 million plus additional payments over time and certain assumed liabilities.
It also received bankruptcy court approval to retain a consulting form to conduct an orderly wind-down of businesses that will not be sold as a going concern, including monetizing remaining inventory and outstanding accounts receivable.
At the time of its bankruptcy filing in September, First Brands had 112 entities, including a global network of manufacturing and distribution centers on five continents. First Brands employed 26,000 people around the world, including 6,000 in the U.S.
It also had more than $11 of debt, including $6 billion in funded debt obligation, $2.3 billion in factoring liabilities, $2.3 billion in off-balance-sheet financing, and $900 million in unsecured supply chain financing liabilities. It further acquired $1.1 billion in debt to maintain the Chapter 11 case.
Edward James' bond modified
Edward James, one of the First Brands executives charged in the alleged fraud associated with First Brands, was granted modifications to his bond conditions to include travel to the Southern District of Ohio. Certain family members live there, Judge Analisa Torres of the U.S. District Court in the Southern District of New York says. Pretrial services' approval is required for all such travel, her order says.
Judge Torres on Thursday also delayed the criminal trial, which was supposed to start in July, after the James brothers asked for more time. She will set new dates, her order says, after April 30, when federal prosecutors will provide an update on the discovery process.
There also have been more detailed allegations against Edward James, brother of former First Brands founder and CEO Patrick James. In a opposition motion filed by First Brands against Onset Financial's motion to reconsider a stay in the adversary case's deadlines and discovery, First Brands says Edward James invested millions through Onset while he represented its debtors, First Brands and associated companies.
"The transactions were not negotiated, lacked due diligence or reasonable documentation and were extremely one-sided in favor of Onset/James," the motion alleges. "Onset and Edward James shared in the profits of their partnership at the expense of the debtors (First Brands) and legitimate creditors."
Onset says First Brands owes it more than $2 billion and that it was just as much a victim of the James' brothers as other creditors claim to be.
"Onset was one of the principal victims of a complex fraud scheme perpetrated by Patrick, the founder, sole owner and since-displaced CEO of First Brands and his brother, Ed, the company's former executive vice president, along with other First Brands insiders," the creditor says in a 200-page complaint.
No ruling has been issued in the motion to reconsider the stay.
Wrangling over debts
Earlier this week, U.S. Bankruptcy Judge Christopher Lopez heard arguments involving Evolution Credit's with First Brands. Evolution says First Brands owes it $230 million and that it should get paid before other creditors in the case. It contends that the factoring agreement First Brands signed gives it a right to receivables not specifically included in that agreement.
"Under the factoring agreement, the receivable sellers (First Brands) sold Evolution what they claimed were $60.5 million in receivables. They also made representations, warranties and covenants relating to the authenticity of the receivables and invoices giving rise to them," Evolution says in a court filing. "The debtors now state that the $60.5 million in receivables sold to Evolution never existed."
First Brands denies Evolution has an interest, and says the money is unsecured and that Evolution is behind at least $5 billion in other debts with little to no chance of ever seeing its $230 million.
Lopez has yet to make a ruling on that case.
