First Brands’ lenders race to secure rescue loan for car parts group

Lenders to First Brands Group are rushing to enactment up the car parts supplier with a caller indebtedness arsenic it contemplates a bankruptcy filing.

First Brands, a privately held radical that had boomed done debt-fuelled acquisitions, has rattled US recognition markets successful caller days connected concerns that billions of dollars of indebtedness could beryllium deed successful a restructuring.

On apical of astir $6bn borrowed done backstage loans, the institution has billions of dollars much successful financing facilities linked to its lawsuit and supplier invoices, overmuch of which is not reflected successful its authoritative indebtedness figures.

That disconnected equilibrium expanse backing could eclipse $4bn, divided crossed indebtedness underpinned by wealth customers beryllium First Brands and borrowings backed by its inventory, said radical with cognition of this financing.

A radical of the company’s largest lenders is moving with restructuring advisers to spot if they tin connection a rescue indebtedness that ranks up of its existing debt.

One enactment nether treatment is whether this could beryllium utilized to repay immoderate of its disconnected equilibrium expanse debt, which could necessitate outgo successful the near-term if the banks and funds that provided those financings are unwilling to rotation implicit their exposure.

However, it is unclear however the institution could make a caller tier of elder debt. As a result, First Brands is considering filing for bankruptcy to rise a debtor-in-possession loan, which would person archetypal precedence implicit the company’s agelong database of existing lenders, 2 of the radical added.

The creditor radical is being advised by instrumentality steadfast Gibson Dunn and advisory steadfast Evercore. First Brands has hired the concern slope Lazard and the instrumentality steadfast Weil Gotshal to counsel connected restructuring discussions, portion advisory steadfast Alvarez & Marsal is besides moving with the institution to assistance found however overmuch backing it needs.

First Brands did not instantly respond to a petition for comment.

The velocity with which First Brands’ finances person deteriorated has shocked indebtedness investors, who were already unnerved by the abrupt illness into bankruptcy of US subprime car lender Tricolor Holdings.

First Brands enactment a projected woody to refinance its indebtedness connected clasp past month, aft immoderate investors raised questions astir aspects of its accounting and fiscal disclosure. The institution appointed Deloitte to nutrient a alleged “quality of earnings” study to assuage these concerns, informing lenders it would relaunch the $6bn indebtedness woody erstwhile this reappraisal was completed.

However, the company’s loans person plunged implicit the past week arsenic lenders person grown acrophobic it volition alternatively person to restructure its debt, with its top-ranking secured loans trading astatine little than 50 cents connected the dollar connected Friday.

The sell-off successful First Brands’s indebtedness comes aft the Financial Times earlier this period reported US backstage equity radical Apollo Global Management had built a abbreviated presumption against the group’s debt.

Apollo was joined successful the commercialized with hedge money Diameter Capital Partners — successful which it owns a involvement — and some groups precocious closed the position, said radical acquainted with the matter. Bloomberg earlier reported they had exited the trade.

The marketplace is besides trying to travel to grips with the size of the financing linked to First Brands’ invoices.

Several backstage recognition firms person vulnerability to these invoice-linked facilities, including a specializer commercialized concern money managed by Jefferies, the US concern bank. Jefferies has heavy ties to First Brands, having besides led the planned refinancing woody that was halted successful August.

Hedge money Millennium had besides provided financing against the company’s invoices. Millennium did not respond to a petition for comment.

While First Brands precocious told lenders it held much than $800mn of currency astatine the extremity of June, immoderate lenders are acrophobic that unit connected its invoice financing could rapidly pain done this cushion, said 2 radical acquainted with the matter.

First Brands is owned by Patrick James, a Malaysian-born businessman who has faced accusations of fraud successful civilian lawsuits from lenders that were yet dismissed. The dearth of nationalist accusation connected the low-profile automotive mogul has further stoked jitters among immoderate of the group’s lenders.

The origins of the institution stem from a 2014 woody successful which James’s Ohio-based holding institution Crowne Group acquired Missouri-based windscreen wiper shaper Trico. The radical went connected to prosecute further acquisitions of rival car parts makers and renamed itself First Brands Group successful 2020.

Additional reporting by Kate Duguid, Sujeet Indap and Jill Shah successful New York