(Dec 24): A major trade finance partner of First Brands Group threatened its right to keep tapping cash made available to the bankrupt auto parts supplier, saying the value of some of its collateral has fallen below agreed-upon thresholds.
Boston-based Evolution Credit Partners on Tuesday (Dec 23) asked a Texas bankruptcy judge to terminate First Brands’ access to certain cash collateral unless the company takes “curative actions”. The cash collateral has helped fund First Brands as it navigates Chapter 11.
In court papers, Evolution said the value of collateral First Brands holds at warehouses in California and Illinois has dipped below agreed-upon thresholds of US$170 million and US$165 million, respectively. As of Dec 12, collateral at each of these locations was worth roughly US$100 million, representing deficits.
First Brands didn’t immediately respond to a message seeking comment on Evolution’s filing. The company could oppose Evolution’s request, which must be approved by Judge Christopher Lopez, who is overseeing the Chapter 11 case.
Earlier this week, First Brands won access to as much as US$60 million that had been trapped in escrow due to a dispute over so-called factoring deals. Evolution said it has been talking with First Brands advisers in hopes of rectifying the situation without getting the court involved, “but those efforts have not been successful, leaving Evolution with no option other than to file this motion”.
First Brands’ restructuring advisers have been working with vendors and customers to unlock as much as US$150 million in withheld customer payments that have stressed the company’s liquidity. At the same time, First Brands’ US$1.1 billion Chapter 11 loan has dropped in recent weeks, a signal that traders expect the company may have difficulty repaying its so-called debtor-in-possession financing.
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Evolution has said it advanced as much as US$300 million to First Brands-affiliated special purpose vehicles between November 2023 and March 2024. In exchange, the company received top-ranking security interests in First Brands’ inventory, accounts and other assets. First Brands owes about US$230 million in principal obligations under the facilities, Evolution said in court documents.
The case is First Brands Group LLC, 25-90399, US Bankruptcy Court Southern District of Texas (Houston).
Uploaded by Arion Yeow
