First Brands faces cash crunch as fraud probe deepens

First Brands, a bankrupt U.S. auto-parts maker, could run out of cash by the end of January as it races to secure new funding and sell assets while fraud investigations widen, company lawyers told a U.S. bankruptcy court on Wednesday.

The company has just $190 million left after borrowing $1.1 billion to fund its Chapter 11 bankruptcy, attorney Sunny Singh said at a hearing in Houston. That amount is only enough to keep operations running through the end of the month.

The looming cash shortage threatens First Brands’ ability to stabilize its business and fully investigate alleged fraud tied to its pre-bankruptcy financing.

Chapter 11 Bankruptcy and Emergency Financing Talks

First Brands is in talks with lenders to secure more debtor-in-possession financing, Singh said. The company will also ask the court to approve near-term asset sales before the end of January.

“We unfortunately don’t have a lot of time,” Singh told U.S. Bankruptcy Judge Christopher Lopez.

The added funding would allow the company to keep operating, probe alleged fraud, and decide how value should be shared among creditors.

Fraud Investigation Clouds Business Value

First Brands filed for bankruptcy protection in September and accused its former CEO, Patrick James, of looting the company as it collapsed in 2025.

In a lawsuit, the company said James caused at least $2.3 billion in liabilities by selling unpaid customer invoices to third-party lenders. The suit alleges some invoices were fake, others were sold more than once, and customer payments were wrongly kept.

James has denied the claims. Judge Lopez has appointed an independent examiner to investigate the alleged fraud investigation and report to the court.

Private Credit Markets Under Scrutiny

The collapse has raised alarms beyond First Brands. The company was backed by major Wall Street firms, fueling concerns about risks inside opaque private credit markets.

Creditors say they still do not know the true value of the business. “We still don’t know if this case is a business with fraud attached, or a fraud with business attached,” said Robert Stark, a lawyer for junior creditors.

Those creditors also accused Edward James, the former CEO’s brother, of taking kickbacks from lender Onset Financial. Lawyers for both parties denied the claims.

Judge Lopez declined to order immediate discovery, saying the examiner should lead the probe.

Asset Sale Process Begins

Separately, First Brands said it has launched an asset sale process, either as a whole or in parts. The company said it has received interest from strategic and financial buyers and aims to complete the process in the first quarter.

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