Autopart supplier First Brands Group has plummeted in credit agency ratings, declaring bankruptcy in the US.
Fitch dropped the company from B to CCC last week – before withdrawing the ratings due to insufficient information. S&P Global dropped the company’s issuer credit rating from CC to CCC+ last week. Yesterday, in light of the company’s voluntary filing for Chapter 11 bankruptcy protection, that fell to D.
A group of cross-holders are providing First Brands with US$1.1 billion in debtor-in-possession financing to support its ongoing operations including customer orders and vendor and partner commitments.
In early August, the company ended its refinancing efforts for existing loans due in 2027. In early September, the loans became distressed.
First Brands has approximately US$6 billion of debt on its balance sheet, US$5 billion of which is first lien debt due in 2027. A further US$540 million is held in second-lien loans. A significant amount of the first lien debt is held in collateralised loan obligations (CLOs) – 54% of the USD-denominated portion, and 81% of the €650 million euro-denominated segment.
“For context, among currently outstanding loans (in the LSTA US Lev Loan Index), only 37% of the sub-80 loans are currently held by CLOs, as many CLOs have managed to reduce exposure to distressed loans ahead of time,” a research note from Morgan Stanley strategists Joyce Jiang, Gabriel Reyes Esclasans, Vasundhara Goel and James Egan stated.
In the US, overall exposure to First Brands is 0.21%. For managers with First Brands loans, exposure ranges from 0.001% to 1.8%, the analysts said. In Europe, First Brands make up 0.19% of CLO collateral. Managers’ exposures range from 0.1% to 3.2% on an individual deal basis.
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