Aniket Pujari(Bloomberg) — First Brands advisers sought to reassure skittish creditors after the value of its $1.1 billion rescue loan collapsed, saying business has stabilized since filing Chapter 11 and moving to unlock funds from receivables it can’t currently access.
The firm said in a press release on Friday it’s seeking court authorization to access about $250 million that’s either being held by First Brands customers or sitting in segregated accounts as part of the bankruptcy process. Those funds would supplement the rescue loan First Brands lenders already agreed to extend the business.
The supplemental funds are related to customer receipts for orders First Brands customers have already fulfilled but that the company said it has so-far been unable to access. The issue has artificially impaired “First Brands’ true liquidity and cash flows, and causing unfounded concerns regarding the Company’s financial position,” the company said.
First Brands said it is also seeking to restart its factoring of customer receipts and seeking expedited payment terms “to improve operational delivery.” Those steps are happening at the same time the auto parts supplier’s new management team has sought to reduce costs and improve operations, the company said. Bloomberg News was first to report the company’s plans to raise a new factoring facility.
“Taken together, these actions represent sources of meaningful value creation and support the Company’s long-term strategic and financial objectives,” First Brands said.
Friday’s statement comes after the value of the rescue loan dropped to as low as 30 cents on the dollar earlier this week. It’s rare for the value of a Chapter 11 rescue loan to collapse so suddenly and suggests creditors are concerned about advisers ability to turn around the business.
Aside from seeking access to new cash, First Brands said Friday that the vast majority of its key vendors are continuing to provide the business with goods and services.
Ordering trends from First Brands customers have also trended upwards since the business sought court protection in September and is now near its pre-bankruptcy petition levels, “reflecting continued confidence in First Brands’ product quality and customer service,” the company said.
–With assistance from Steven Church.
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