US Seeks Independent Bankruptcy Probe of First Brands Crash
Auto Parts Supplier Admits It Can't Find $2.3 Billion Related to Off-Balance Sheet Financing Deals
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The federal watchdog for corporate bankruptcies joined a creditor’s demand for an independent investigation of thetroubled auto parts supplierFirst Brands Group, which has admitted it can’t find $2.3 billion related to off-balance sheet financing deals.
The U.S. Trustee argued in court filings that “serious allegations of fraud, dishonesty, incompetence, misconduct or mismanagement,” justifies a quicker-than-normal process to appoint a bankruptcy examiner in First Brands’ insolvency case. Lawyers for the U.S. Trustee, Kevin Epstein, asked the judge overseeing the bankruptcy to move up a hearing on the request to Oct. 29 from Nov. 17.
Earlier this month, Raistone, a provider of short-term financing, demanded an independent examiner to probe the missing $2.3 billion, arguing the company’s internal investigation “is woefully insufficient given the magnitude of potential misconduct at issue.”
Both requests must be reviewed by U.S. Bankruptcy Judge Christopher M. Lopez, who is based in Houston. Lopez is currently scheduled to consider Raistone’s request next month.
Bankruptcy examiners report to the judge overseeing the Chapter 11 case and their investigations are separate from any probes by prosecutors or federal regulators. Examiners are regularly sought in bankruptcies where the Department of Justice is investigating allegations of wrongdoing or mismanagement, including the failure of fraud-tainted crypto exchange FTX.
READ MORE:RealTruck Seeks to Assure Lenders After First Brands Debt Hit
First Brands’ late September bankruptcy filing, which listedmore than $10 billionof liabilities on its Chapter 11 petition, set off a round of damage limitation by Wall Street firms now attempting to size up their exposure to the company. A fund controlled by a unit of Jefferies Financial Group Inc.has about$715 million invested in receivables due by First Brands’ customers.
The case is First Brands Group,, US Bankruptcy Court, Southern District of Texas (Houston).
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