First Brands Lenders Allege ‘Widespread Fraud’ in Filing
Group Joins Calls for Independent Examiner
[Stay on top of transportation news: .]
A group of First Brands lenders have accused the auto parts supplier of “widespread fraud” and are seeking to end part of the auto parts supplier’s bankruptcy.
Lenders to certain First Brands-related special purpose vehiclessaidin an Oct. 30 court filing that besides existing allegations that the company double-pledged assets, new information has come to light indicating the business “made misrepresentations in numerous financial statements, credit agreements, and borrowing base certificates.”
The lender group is seeking to have the special purpose vehicles dismissed from First Brands’ bankruptcy case and have also joined calls from other creditors for the appointment of an independent examiner following claims that billions of dollars hadvanishedfrom the company.
Although the special purpose vehicles were supposed to always have cash in their bank accounts, First Brands informed lenders shortly before the bankruptcy filing “that those bank accounts had no cash in them, and that the debtors’ advisers did not know where the cash that was previously in the accounts had gone,” lenders said in the latest filing.
The special purpose vehicles held certain types of First Brands inventory, primarily windshield wipers, filters and brakes, lenders said. A Texas bankruptcy judge is scheduled to consider lenders’ request to dismiss the special purpose vehicles from Chapter 11 on Nov. 17.
The new claims add to a mounting allegations from creditors of wrongdoing before the company filed bankruptcy. Funds managed by Evolution Credit Partners, which had inventory finance agreements with special purpose vehicles,saidin a separate filing seeking appointment of an independent trustee that the business “fraudulently siphoned assets away” from those entities.
First Brands founder Patrick Jamesresignedas CEO earlier this month. Meanwhile, federal prosecutors are looking into the circumstances around First Brands’ collapse, Bloomberg News has reported. A lawyer representing First Brands directors and officers has denied creditor allegations of wrongdoing.
The case is First Brands Group LLC, number 25-90399, in the US Bankruptcy Court for the Southern District of Texas.
Want more news? Listen to today's daily briefing belowor go here for more info:
