The head of First Brands is considering resigning under pressure from lenders

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The CEO of First Brands Group may step down from the bankrupt auto parts maker, as lenders seek to oust him in the face of mounting losses on billions of dollars in debt, according to people familiar with the matter.

A spokesman for Patrick James said the First Brands founder was considering “giving up his role” at the helm of the group in response to questions from the Financial Times.

“Patrick James has always put First Brands Group’s interests before his own and is evaluating his best path forward to help maximize value for its customers, suppliers, employees and lenders,” the spokesperson said.

The potential departure of James would limit A.J A turbulent few weeks For the low-profile CEO, whose company borrowed from some of Wall Street’s biggest institutions to finance a quick takeover.

Its rapid collapse prompted an investigation by the US Department of Justice, reports the Financial Times I reported earlier this week. Federal prosecutors are still in the early stage of the investigation into the alleged financial irregularities.

One person indicated that James may be fired in the coming days. The company is at the mercy of its lenders to finance its operations through bankruptcy.

Creditors agreed to lend $1.1 billion to stabilize the company’s business through bankruptcy, a capital requirement. First brands Hit the landmarks. The company’s advisers estimate it will spend more than $900 million between filing for Chapter 11 bankruptcy protection in September and late December.

The sources said that James’s brother, Edward, resigned from his senior position in the company.

Charles Moore, an executive at consulting firm Alvarez & Marsal, took over as chief restructuring officer as part of the bankruptcy process. Stakeholders kept Patrick James around for his cooperation during what was a chaotic race to file for bankruptcy protection and maintain business continuity, the people said.

A First Brands representative declined to comment. Alvarez did not respond to a request for comment.

Michael Baker, who served as chief corporate strategy officer at First Brands, has also resigned from his position, people familiar with the matter said. His LinkedIn profile shows his work in the position ending in September. Baker joined First Brands in 2021 from the law firm Paul Hastings, where he served as a partner for a decade.

The rapid collapse of First Brands occurred alongside the collapse of high-risk auto bank Tricolor at the beginning of the month Raised concerns From significant losses for some of Wall Street’s most famous players, as well as the potential for broader repercussions across debt markets.

The company, which makes Michelin-branded windshield wipers in Europe and Carter fuel pumps in the United States, has raised nearly $12 billion in debt and off-balance sheet financing. Its term loans worth about $5.5 billion are now priced at cents on the dollar, with an implied loss of more than $4 billion.

The company has also been a heavy user of off-balance sheet financing, selling client invoices at a discount to funds owned by units of investment bank Jefferies, Swiss bank UBS, Katsumi Global, a finance company owned by Japan’s Mitsui & Co. and Norinchukin Bank.

One of its lenders earlier this week demanded up to $2.3 billion “It simply disappeared”First Brands’ advisors said they were unable to locate the relevant warranties.

Meanwhile, BlackRock and Morgan Stanley sought to redeem their stakes in the Jefferies fund, which was stretched $715 million in credit For First Brands customers, people familiar with the matter said. The refund requests were previously reported by Bloomberg.

Morgan Stanley, BlackRock and Jefferies declined to comment.

In the 2000s, James, 61, acquired industrial companies, including Columbus Component Group, an Indiana-based auto parts manufacturer. After many of these companies encountered financial difficulties during the 2008 financial crisis, James and other companies associated with him were sued by two lenders alleging that fraudulent behavior exacerbated their losses. James denied the accusations and the cases were dismissed after they settled.

James founded Crown Group, which in 2014 acquired Michigan-based Trico Products, a manufacturer of windshield wipers. The combined group then pursued further debt-financed acquisitions, rebranding itself as First Brands Group.

Edward James played a key role in raising First Brands’ bill and inventory financing, according to several area professionals who said they met with him to negotiate loans.

First Brands described Edward James as holding various roles at the company, including in “finance, accounting and working capital solutions,” in a 2023 filing with the Securities and Exchange Commission.

Additional reporting by Sujit Indap and Kate Duguid And Joshua Franklin In New York