Judge approves examiner appointment in First Brands bankruptcy amid fraud probe

By Pritam Biswas

Jan 9 (Reuters) - A U.S. bankruptcy court on Friday approved the appointment of Martin De Luca as a corporate litigator in the Chapter 11 case of First Brands, which is grappling with allegations of fraud as the auto parts maker restructures under court protection.

The order was signed by U.S. Bankruptcy Judge Christopher Lopez, who is overseeing First Brands Group's bankruptcy case and had ordered an independent investigation, backed by a $7 million budget, into alleged fraud tied to the company's use of third-party financing for customer invoices.

The move comes days after the company's lawyer Sunny Singh warned it could run out of cash by the end of the month and said it was seeking additional financing from lenders and exploring near-term asset sales to buy time for a restructuring.

First Brands has about $190 million of cash left after borrowing $1.1 billion to begin its bankruptcy, but that amount will only fund operations through the end of January, Singh told a Houston court on Wednesday.

The company had filed for bankruptcy protection in late September after disclosing liabilities exceeding $10 billion. In its Chapter 11 petition, First Brands estimated liabilities in the range of $10 billion to $50 billion, while its assets were estimated at between $1 billion and $10 billion.

The auto parts maker has also accused its former Chief Executive Patrick James of looting the company as the bankruptcy case unfolded in 2025.

The company's collapse, despite backing from some of Wall Street's largest financial institutions, raised concerns about a broader breakdown in the opaque private credit markets.

Privately held First Brands, which manufactures replacement parts such as filters, brakes and lighting systems for the automotive aftermarket, built its position as a major industry player through a series of debt-financed acquisitions of rival auto parts companies.

Luca, who advises high net worth clients in disputes, is a partner in the law firm of Boies Schiller Flexner.