First Brands Bankruptcy Probe Investigating Financing Irregularities Related to Invoices
October 1, 2025
Source: Reuters
NEW YORK, Sept 30 (Reuters) - Auto parts maker First Brands has appointed a special committee of independent board directors to investigate its off-balance sheet financing arrangements and whether its invoices were factored in multiple times, according to court documents filed on Tuesday.
The company, which filed for bankruptcy protection this week, believes it had an unpaid $2.3 billion hole on its balance sheet related to third-party factoring arrangements when it filed for Chapter 11 proceedings, according to the statement filed by Charles Moore, its new chief restructuring officer.
Reuters reported on Monday that First Brands was probing an issue with its factoring arrangements amounting to about $2 billion.
The Ohio-based company has been working with law firm Weil, Gotshal & Manges, investment bank Lazard, and consulting firm Alvarez & Marsal on its bankruptcy proceedings.
In its latest filings, First Brands disclosed total liabilities of $11.6 billion. Excluding its factoring liabilities, First Brands had about $9.3 billion of debt obligations. Factoring is a financing method used by companies to sell outstanding customer invoices to investors in return for cash.
The special committee of First Brands independent directors is investigating whether the company's receivables may have been factored more than once. The review of its books has already uncovered that its debt collateral has "commingled", according to the filings. The group of borrowers whose inventory may have commingled collectively held $376 million of inventory as of August 2, the filings showed.
On Monday, First Brands filed for bankruptcy protection after obtaining $1.1 billion in debtor-in-possession financing from its first-line lenders to support ongoing operations.
Financial troubles at the auto parts supplier, coupled with the recent bankruptcy of subprime auto lender Tricolor Holdings, have rattled debt investors and stoked fears of broader stress in corporate debt markets, according to bondholders and bankruptcy experts.
Some of the financial firms exposed to First Brands included UBS-backed hedge fund manager O'Connor; CIT Group, which is now owned by First Citizens Bancorp; Nomura and SouthState Bank SSB. They were among the 30 largest creditors, which had unsecured claims against First Brands.
