First Brands is already winding down North American operations of its Brake Parts, Cardone and Autolite units after failing to secure funding or find buyers for them. (Nick Oxford/Bloomberg)
February 13, 2026 2:30 PM, EST
Key Takeaways:
- First Brands is considering Chapter 7 liquidation for some units as cash shortages intensify.
- Mediation continues over collateral disputes and the impact of fraud allegations on the restructuring.
- Lenders have reduced funding support as debt values fall and liquidation becomes more likely.
First Brands Group and some of its creditors are weighing shifting certain units into Chapter 7 bankruptcy liquidation as the company runs low on cash, according to people familiar with the matter.
The move could allow the auto-parts maker to sell assets and reduce advisory costs that have drained its bankruptcy loan, said the people, who asked not to be named discussing private information. The talks remain preliminary, and no final decision has been made about pursuing Chapter 7.
A representative for First Brands didn’t immediately respond to a request for comment.
First Brands is already winding down North American operations of its Brake Parts, Cardone and Autolite units after failing to secure funding or find buyers for them, it said last month.
The company has so little cash that it has been operating on a week-to-week basis with help from automakers willing to pay in advance to keep vital parts flowing. Converting some units from Chapter 11 to Chapter 7 would place those businesses under a court-appointed trustee and, if still operating, lead to shutdown and liquidation. Typically, creditors recover less in a Chapter 7 liquidation than through a Chapter 11 reorganization or auction sale.
Mediation
Once viewed as a company that could emerge largely intact after shedding some of its more than $10 billion in debt, allegations of widespread fraud across a complex web of financings have led some lenders to conclude that breaking it up may be the only viable option.
The company and creditors have been in mediation for the past couple of weeks to resolve disputes over which debts are backed by collateral, which assets are actually owned by third-party financiers and how to keep First Brands operating long enough to sell its factories and other divisions. A litigation trust may be created as part of the mediation to reach a compromise with the unsecured creditors committee, the people said.
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In December, First Brands asked lenders for as much as $800 million, but the rapid decline in the value of its existing bankruptcy loan, rising advisory fees and the breadth of fraud allegations diminished appetite for providing additional funding. The company has since reduced the request as lenders considered selling or liquidating certain businesses, which would result in a smaller operation, Bloomberg previously reported.
The company’s most senior debt was quoted between 13 and 16 cents on the dollar on Feb. 13, according to a broker note seen by Bloomberg. Meanwhile, the second-most-senior loan was quoted between 0.375 and 0.625 cents, and the first-lien loan that predated the bankruptcy was quoted at 0.0625 cents.
