Units Linked to First Brands File for Bankruptcy
Development Could Increase Pressure on Auto Parts Supplier
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A group of companies used by ailing auto part manufacturer First Brands Group to raise financing has filed for Chapter 11 bankruptcy protection.
Firms under the Carnaby Capital Holdings umbrella sought court protection on Sept. 24 in the Southern District of Texas, listing between $1 billion and $10 billion in liabilities, according to the filing.
Patrick James, the owner of First Brands, is listed as president and CEO of various Carnaby units, and his signature appears in the bankruptcy document. Carnaby is based in Cleveland and is represented by Weil, Gotshal and Manges, the same law firm advising First Brands.
A First Brands representative declined to comment.
The development could increase pressure on First Brands, which has been considering whether to file for bankruptcy to raise a rescue loan after halting a $6 billion refinancing in August. Credit investors had been asking for a quality-of-earnings report, which involves a third-party reviewing the accounts.
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First Brands has made extensive use of off-balance sheet financing, which allows companies to cash in early on their receivables or pay suppliers with a lender facility. Revenues had surged following a number of acquisitions that were fully funded by debt, according to a Moody’s report on Sept. 22.
Some Carnaby units were mentioned as a vehicle to raise financing in reports filed to the Securities and Exchange Commission by Carval Credit Opportunities, one of the First Brands’ lenders. The ultimate owner of Carnaby Capital Holdings is Viceroy Private Capital, according to the bankruptcy filing.
Carval Credit Opportunities and Weil, Gotshal and Manges, the law firm, did not immediately respond to requests for comment.
