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Oaktree, Anchorage Buy Into First Brands Bankruptcy Loan
Distressed-Debt Giants Join First Brands’ DIP Loan as Bankrupt Auto Parts Supplier Warns Cash Could Run Out Within Weeks
Distressed-debt giants Oaktree Capital Management and Anchorage Capital have amassed positions in the bankruptcy financing for First Brands Group, stepping in as negotiations over a fresh capital injection for the auto parts supplier come down to the wire.
The firms have bought up stakes in First Brands’ $1.1 billion debtor-in-possession (DIP) loan — a type of borrowing that’s typically first in line to be repaid in bankruptcy — according to people familiar with the matter. Their purchases come as the loan trades at distressed levels.
Anchorage and Oaktree joined the bankruptcy financing as First Brands negotiates an additional loan with its existing lenders, after warning it will run out of money by the end of the month without the extra cash.
A sticking point for creditors in those discussions is the advisory fees First Brands has racked up since seeking bankruptcy protection in September, the people said, asking not to be identified discussing private information. The company is trying to unwind a complex web of so-called factoring transactions that restructuring advisers say left it burdened with billions of dollars of debt.
Representatives for Anchorage and Oaktree declined to comment. First Brands and its restructuring adviser, Alvarez & Marsal, didn’t immediately respond to requests for comment.
First Brands has appealed to creditors for new cash and was seeking as much as $800 million in December. The company said earlier this month that it only has enough funds to last through the end of January, a shortfall that could force it to shut down some businesses and sell other operations. It was in talks with existing lenders to secure enough money to continue operating and cover bankruptcy costs, its attorney said then.
The slumping price of First Brands’ DIP loan suggests creditors have viewed the injection of new, higher-priority money as all-but inevitable. The capital would require the approval of two-thirds of the firm’s current rescue loan holders, advisers to creditors said on a lender call in December.
