First Brands' Liquidity Gambit: Unshackling Trapped Assets to Reassure Creditors

First Brands Group's Chapter 11 bankruptcy filing in late September 2025, revealing liabilities exceeding $11 billion, has thrust the automotive parts supplier into the spotlight of corporate restructuring drama. Yet, amid the chaos, the company has embarked on an aggressive liquidity strategy to reassure creditors and stabilize its operations. By targeting trapped assets and securing critical financing, First Brands aims to rebuild trust in a market skeptical of its opaque financial practices.

A Bankruptcy Fueled by Liquidity Crises

First Brands' collapse was precipitated by its reliance on off-balance-sheet financing, a practice now under scrutiny from creditors and regulators. According to a report, the company's Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas exposed liabilities ranging from $10 billion to $50 billion, with UBS Group AG emerging as one of its largest creditors, holding claims exceeding $500 million. The fallout has rippled across the financial sector, with institutions like UBS liquidating invoice finance funds tied to First Brands and Hong Kong-based Raistone cutting ties after losing 80% of its revenue stream.

Aggressive Trapped Asset Recovery

Central to First Brands' restructuring is its pursuit of trapped assets-funds locked in customer accounts or segregated during bankruptcy proceedings. In November 2025, the company filed for expedited relief to access approximately $250 million in customer receipts, a move described as "critical for improving liquidity and supporting reinvestment" in a BusinessWire statement. This effort aligns with broader factoring initiatives, including discussions to restart traditional customer factoring programs, which could unlock additional cash flow.

The company has also secured $1.1 billion in DIP financing from first lien lenders, approved by the court in early November, and an additional $600 million in rescue funding after resolving creditor disputes. These measures, coupled with a revised $150 million revolving credit facility (extended to 2028), provide First Brands with flexibility to deploy capital while lowering debt costs.

Creditor Reassurance and Structural Reforms

Despite these steps, skepticism persists. Senior debt has plummeted to 63 cents on the dollar, reflecting investor concerns over the feasibility of the restructuring. To address this, First Brands has added seasoned automotive executives as senior advisers and scheduled creditor calls to outline its path forward. Meanwhile, creditors have demanded the appointment of independent advisers for units involved in off-balance-sheet debt, citing conflicts of interest and allegations of fraudulent activity involving the company's founder.

The company's recent $57.5 million Series B Preferred Shares Offering, with a 7.875% stated rate, further underscores its commitment to stabilizing capital structures. These actions signal a shift toward transparency, though challenges remain in reconciling creditor demands with operational realities.

The Road Ahead

First Brands' liquidity strategy hinges on balancing short-term survival with long-term value creation. While the recovery of trapped assets and refinancing efforts provide immediate relief, the company must navigate legal investigations and rebuild credibility with stakeholders. As noted in a Bloomberg analysis, the restructuring's success will depend on its ability to execute a coherent plan that addresses both financial and governance shortcomings.

For creditors, the path forward remains fraught. UBS's liquidation of its O' Connor funds and Raistone's layoffs highlight the broader risks of exposure to opaque financing structures. Yet, First Brands' proactive approach-combining capital access, structural reforms, and stakeholder engagement-offers a blueprint for navigating corporate distress in an era of heightened scrutiny.