Why This Matters to Distributors: First Brands is a major manufacturer and supplier to automotive aftermarket distributors and retailers, with brands including FRAM, TRICO, Autolite and Cardone. A federal bankruptcy judge’s rejection of its Chapter 11 restructuring plan moves the company toward Chapter 7 liquidation, putting the focus on its remaining assets and obligations.
A federal bankruptcy judge has rejected First Brands Group LLC’s Chapter 11 restructuring plan, moving the automotive aftermarket manufacturer and supplier toward Chapter 7 liquidation after a year in bankruptcy.
U.S. Bankruptcy Judge Christopher M. Lopez of the Southern District of Texas denied approval of First Brands’ Chapter 11 plan Aug. 24, according to court records.
The ruling followed a confirmation hearing that ran from July 28 through Aug. 7. Lopez delivered his decision orally on Aug. 24, and the court entered an order denying approval of the plan the same day.
The written order does not detail Lopez’s reasoning. Instead, it refers to the findings and conclusions he delivered during the Aug. 24 hearing.
Two days later, First Brands filed a proposed order to convert its bankruptcy cases from Chapter 11 to Chapter 7, according to the court docket.
The conversion would mark a major shift in the case. First Brands had been attempting to resolve its financial problems under Chapter 11. Under Chapter 7, a court-appointed trustee would take control of the remaining bankruptcy estate, oversee the sale of remaining assets, and determine how available proceeds are distributed to creditors.
First Brands’ proposed Chapter 11 plan addressed its remaining assets, creditor claims and potential legal actions. Lopez rejected the plan after considering evidence and arguments presented during the confirmation proceedings, according to the court order.
Attorneys representing parties in the case began requesting transcripts of Lopez’s oral ruling shortly after the Aug. 24 proceeding. The court docket shows requests for expedited and standard delivery of the complete ruling.
First Brands manufactures and supplies replacement parts for the automotive aftermarket. Its brands have included FRAM filters, TRICO windshield wipers, Autolite spark plugs and Cardone replacement parts, which are sold through distributors, retailers, and other aftermarket channels.
The move toward Chapter 7 does not necessarily mean those individual brands or product lines will disappear. First Brands has sold businesses and other assets during bankruptcy, while the proposed conversion applies to the assets and obligations that remain in the bankruptcy estate.
The next major step is entry of the Chapter 7 conversion order. Once the conversion takes effect, control of the remaining bankruptcy estate would shift from First Brands to a Chapter 7 trustee, ending the company’s effort to restructure under Chapter 11 and moving the case into liquidation.
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