Lawyers for First Brands have urged a federal bankruptcy judge in the US to urgently approve a restructuring plan.
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A report in the Financial Times said the plan has its heart the funding of lawsuits against those allegedly responsible for fraudulent practices at the automotive parts firm.
First Brands current management has alleged that former management figures fraudulently pledged some assets multiple times as collateral across different loans, creating conflicts over repayment hierarchy.
First Brands, after shutting 17 plants and cutting 4,000 jobs earlier this year, has been trying to offload its remaining parts-manufacturing sites as new leadership unearthed pervasive wrongdoing and the company’s lenders balked at funding a costly turnaround of the conglomerate.
The FT report said First Brands has warned that failure to approve the current plan by a Houston judge could trigger a chaotic liquidation under US Chapter 7 rules.
The FT said a centrepiece of the current plan is a so-called litigation trust to pursue potentially $1bn from First Brands executives who allegedly ‘looted the company to fund a lavish lifestyle of expensive houses and cars’.
The FT report pointed out that First Brands founder Patrick James faces criminal fraud charges related to fabricated invoices and that other executives have also pleaded guilty to fraud charges.
First Brands to sell brand portfolio to PGI for $25m
