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Bankruptcy Judge Rejects First Brands' Plan
25 Aug
Summary
- First Brands' Chapter 11 plan was rejected by a U.S. bankruptcy judge.
- The company owes billions and sales generated only a fraction of debts.
- The case converted to a straightforward Chapter 7 liquidation.
A U.S. bankruptcy judge on Monday rejected auto parts maker First Brands' proposal to repay creditors. The proposed Chapter 11 plan was deemed unacceptable by U.S. Bankruptcy Judge Christopher Lopez. This decision converts the case to a more straightforward Chapter 7 liquidation.
The judge cited that the plan sought to defer payment on at least $222 million in debts incurred during the bankruptcy. First Brands owes billions more from before its bankruptcy, and efforts to sell business lines generated only a fraction of what is owed to creditors.
This collapse caused significant losses for major investment firms and raised concerns about fund managers' exposure to private credit markets. Creditors and the Justice Department's watchdog doubted the company's litigation strategy would yield meaningful recoveries, especially from its indicted founder. First Brands filed for bankruptcy in September with approximately $14 million in cash and over $9 billion in liabilities.
