Major auto parts maker First Brands Group, LLC. filed for bankruptcy protection over the weekend — revealing billions of mounting debt in the process.
The auto parts manufacturing company filed for bankruptcy Sunday, Sept. 28, after disclosing more than $10 billion in liabilities, court filings show.
Bloomberg described the filing as “capping weeks of turmoil sparked by creditor concern over the auto-supplier’s use of opaque off-balance sheet financing.”
According to financial firm Investopedia, off-balance sheet items are important financial elements that remain unlisted on a company’s main balance sheet.
“These items, often detailed in the accompanying notes of financial statements, become a focal point for investors evaluating a company’s financial stability,” the firm notes.
“While some off balance sheet items, such as operating leases or collateralized debt obligations, serve legitimate financial strategies, they can also obscure liabilities, highlighting the need for careful scrutiny to uncover any potential hidden financial risks.”
Last week, rumors of the company’s filing began circulating that First Brands Group LLC. was “running out of cash,” and lenders were reluctant give “more money to keep its operations going without court protection,” Bloomberg reported, citing people familiar with the situation.
Mere days later, the company filed for bankruptcy.
On Monday, First Brands Group announced it secured $1.1 billion in financing that will “provide the necessary capital for the Company to maintain operations, fulfill customer orders, and meet its commitments to its vendors and partners from the start of the chapter 11 cases.”
Chuck Moore, chief restructuring officer of First Brands said in the company’s public statement the move is “an important step toward stabilizing First Brands’ operations and securing a long-term future for the Company’s world-class portfolio of aftermarket automotive part brands.”
Court filings show the company maintains between $1 billion and $10 billion in assets, compared to estimated liabilities ranging from $10 billion to $50 billion.
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