A frame oil filter. Fram comes under the umbrella of First Brands Group. (Fram via LinkedIn)
key takeaways:
- On June 17, a US bankruptcy judge ordered Accum Capital Financial II to escrow the proceeds from First Brands’ inventory sales amid a dispute with Bank of America.
- The decision stems from competing claims over more than $40 million of loans and collateral attached to the broader $446 million asset-backed facility.
- The court will decide on the merits of the lawsuit while creditors try to pursue claims against Aquim and First Brands continues to liquidate assets and cease operations.
A judge ruled on June 17 that Aquim Capital Financial II is temporarily barred from distributing any cash collected from an inventory sale taking place as part of the liquidation of bankrupt auto parts supplier First Brands.
The decision marks an early victory for Bank of America in its lawsuit against Aquim. Both lenders claim collateral rights on car parts manufactured by First Brands. Accum is trying to sell inventory to pay off more than $40 million that an affiliate of First Brands owes on a revolving credit line.
US Bankruptcy Judge Christopher Lopez agreed that any proceeds from the sale should be put into escrow until he resolves the lawsuit, which was filed in April. Akume has asked Lopez to dismiss the lawsuit, claiming it has no merit.
Before the judge’s decision, Accum’s lawyer William Dorsey argued that blocking Accum’s access to cash could lead to the company defaulting on its own loans. A representative for Aquam did not respond to a request for comment on the decision.
Meanwhile, Accum’s debt to First Brands affiliate has been investigated by the Official Committee of Unsecured Creditors in the bankruptcy case. That committee is seeking permission to prosecute Acum.
According to a court filing, Accum loaned $44 million to an off-balance sheet unit, known as a special purpose vehicle, which was ultimately awarded to a company linked to First Brands founder Patrick James. James and his brother Edward have pleaded not guilty to various fraud charges and face criminal trial. A representative for Patrick James has denied allegations of wrongdoing.
First Brands is liquidating its assets and closing or selling its businesses. The company has laid off thousands of employees and closed dozens of facilities.
Bank of America is an agent for the $446 million, asset-backed loan that was secured by First Brands’ inventory and other collateral. The matter is of First Brands Group, 25-90399US Bankruptcy Court, Southern District of Texas (Houston).
