Auto Parts Giant Faces Cash Collateral Threat

First Brands Group is facing a critical challenge as its trade finance partner, Evolution Credit Partners, has threatened to revoke access to essential cash collateral. This move comes after the value of collateral held by First Brands in warehouses located in California and Illinois reportedly dropped below the agreed-upon thresholds of $170 million and $165 million, respectively. As of December 12, these holdings were valued at approximately $100 million each, creating significant deficits.

Evolution Credit Partners stated it filed a motion with a Texas bankruptcy judge to terminate First Brands' access to this crucial funding unless "curative actions" are taken. These discussions were an attempt to resolve the matter without judicial intervention, but have not yielded a successful outcome. First Brands, which is currently navigating Chapter 11 bankruptcy proceedings, relies on this cash collateral to operate.

The company has been actively working to unlock withheld customer payments totaling as much as $150 million to bolster its liquidity. Meanwhile, there are indications of potential repayment difficulties for First Brands' $1.1 billion Chapter 11 loan, as reflected by a recent drop in its market value. Evolution had advanced up to $300 million between November 2023 and March 2024, securing its position with collateral on First Brands' assets.