First Brands facing cash crisis as company seeks emergency funds – Financial Times

US investment bank Jefferies Financial took a $30mn loss tied to the collapse of car parts supplier First Brands Group, with chief executive Rich Handler saying the firm deeply regretted its involvement in the debacle.

The loss was tied to Jefferies’ stake in an investment fund owned by the bank known as Point Bonita, which provided hundreds of millions of dollars’ worth of off-balance-sheet financing to First Brands. The bank is being investigated by the US Securities and Exchange Commission, which is probing disclosures Jefferies made to Point Bonita investors.

Handler said that last year “delivered serious disappointment with the fraud and bankruptcy of First Brands substantially impacting Point Bonita”. The loss represents a wipeout of the vast majority of Jefferies’ stake in First Brands receivables held through Point Bonita, which the bank disclosed in October were worth $43mn. The Point Bonita fund was hit with a wave of client redemptions after First Brands’ bankruptcy, according to people briefed on the matter.

First Brands is racing to sell assets and secure new capital from its lenders to avoid liquidation, with a cash crunch looming at the end of the month.

The company had been negotiating with its lenders to raise money through a new loan, Sunny Singh, counsel for First Brands, told a bankruptcy court in Houston on Wednesday. The new so-called super senior loan would have repayment priority over other debts. First Brands had $190mn of unrestricted cash left that it could tap at the start of this week, Singh said.

First Brands sought as much as $800mn from creditors in late December, said people briefed on the matter. Lenders balked at the sum, given the business’s deterioration as allegations of fraud emerged and investigations into the company by creditors revealed financial discrepancies, one of the people added.

“We are at a critical juncture . . . right now January is essential,” Singh said. “We are focused on negotiating a path out of Chapter 11 [bankruptcy protection] . . . through a sales process.”

He said First Brands needed “as many of these business lines out of Chapter 11 as soon as possible to maximise value and save jobs”.

The need for new funding became apparent last month after First Brands disclosed operating results, which showed it was rapidly burning through cash as the bankruptcy progressed. Lenders began dumping their holdings of a $1.1bn loan that the company had secured to stabilise its business during the collapse. That loan has changed hands at roughly 17 cents on the dollar this week.

“Despite the best efforts of the [First Brands]’ advisers and professionals, the business has not seen the turnaround necessary,” Ian Phillips, an attorney representing one group of creditors, wrote in a motion this week.

He noted it was uncertain whether First Brands would be able to secure additional capital, adding it was “unclear whether there will be any funding for further investigation or litigation”.

Bankers at Lazard, who were hired by First Brands to explore a sale of the business last year before it filed for bankruptcy, have again begun to reach out to potential buyers for some of the company’s business lines. First Brands makes and markets Michelin-branded windscreen wiper blades, Fram engine air filters and Autolite spark plugs.

Singh said the company was expected to run a brisk sales process that could be finalised before the end of the month. Some of its lenders bid on First Brands’ assets earlier this week, he added.

Advisers were also pursuing an “orderly wind-down of certain assets” alongside the sales process, according to a presentation prepared for the court.

First Brands collapsed last year after its intensive use of off-balance-sheet financing spooked potential lenders and new tariffs put in place by US President Donald Trump weighed on its business.

Advisers and lenders have now alleged owner and chief executive Patrick James engaged in fraudulent conduct that enriched himself to the detriment of the company. Federal prosecutors have launched a probe into First Brands, the Financial Times has reported.

James has denied wrongdoing.