First Brands to Pursue Insider Lawsuits in Wind-Down Plan

The court’s decision allows First Brands to move forward with a litigation trust, backed by $75 million in initial funding. This capital includes $25 million from the company’s remaining cash reserves and an additional $50 million infusion from lenders who previously provided $1.1 billion in bankruptcy financing. The trust intends to target founder Patrick James and his brother, Edward James, both of whom face federal fraud charges for allegedly stripping capital from the firm before its collapse.

First Brands entered bankruptcy last September under the shadow of allegations that it fraudulently double-pledged assets as collateral. Attempts to reorganize failed, and the company currently faces more than $11 billion in outstanding debt. With the company’s liquidity exhausted since January, it has survived on prepayments from major automotive partners like Ford and GM. While the company offloaded assets such as its Horizon towing business and Toledo Molding & Die, these sales covered only a fraction of its liabilities. The Office of the U.S. Trustee has flagged that the company is currently $223 million in arrears on administrative expenses, leaving most creditors poised to absorb heavy losses regardless of the litigation’s outcome. Judge Lopez is scheduled to review the final wind-down proposal at a hearing in July.