First Brands Creditor Seeks Investigation of ‘Vanished’ Cash
Auto Parts Supplier’s Bankruptcy Filing Led Firms to Size Up Their Exposure
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Raistone, a provider of short-term financing that worked on deals for First Brands Group, is demanding the appointment of an independent examiner for the business after alleging late Oct. 8 that as much as $2.3 billion has “simply vanished” from the bankrupt auto parts supplier.
The request for appointment of an independent examiner follows an Oct. 2 email exchange in which a bankruptcy lawyer for First Brands told Raistone that advisers don’t know if the auto parts supplier has received an estimated $1.9 billion. The exchange followed First Brands’ initial court hearing in which the company won access to more than $1 billion in emergency financing to prevent the business from collapsing.
“First, do we know whether FBG actually received $1.9 billion (no matter what happened to it)?,” Raistone lawyer Emanuel Grillo said in an Oct. 2 email, which was filed in bankruptcy court in support of its request for an examiner. “Second, would you tell us how much is in the segregated accounts in respect of the factored receivables as of today?”
“#1 —We don’t know,” First Brands restructuring lawyer Sunny Singh said in response to the questions. “#2 - $0.”
Singh is a partner at the law firm Weil, Gotshal & Manges LLP, which First Brands has retained to represent the company in Chapter 11.
Raistone’s request must be reviewed by a Texas bankruptcy judge who is overseeing the Chapter 11 case. First Brands has already said an independent board committee is investigating the company’s use of off-balance sheet financing.
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However, Raistone said Oct. 8 that the board investigation “is woefully insufficient given the magnitude of potential misconduct at issue.”
First Brands' bankruptcy filing, which listed more than $10 billion of 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.
