First Brands Factoring Agreements a $2 Billion Variable at Play in Potential Chapter 11 filing – Legal Analysis

First Brands, an Ohio-based auto parts company, is reportedly considering a Chapter 11 filing in the near term. Concerns have been raised over the company’s off-balance sheet financing, which reportedly includes USD 2bn in invoice-factoring facilities, which could become a significant issue in a bankruptcy. Because we have not seen the factoring agreements, we do not know whether their terms are standard or unique to the company and its factors. However, given the reported amounts of the agreements, they are likely to significantly impact the company’s way forward, including determinations of reorganizing versus liquidating portions of the business, and identifying the fulcrom security.

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Source: ION Analytics