The embattled chief executive of First Brands, an American auto-parts maker that filed for bankruptcy last month amid an uproar over its lending and accounting, resigned on Monday.
Patrick James, a Malaysian-born businessman who founded First Brands more than a decade ago in Ohio, stepped down as the company said it would focus on “stabilizing” its global operations while undergoing bankruptcy proceedings. First Brands named Charles Moore, as its interim chief executive. Since September, Mr. Moore has been the company’s “chief restructuring officer,” and has been involved in reorganizing the troubled enterprise.
“Mr. James has always prioritized the company’s interests above his own, and he remains deeply committed to the success of the business and the maximization of value for the benefit of its customers, suppliers, employees and lenders,” a spokesman for Mr. James wrote in an email.
A manufacturer of car parts including oil filters, spark plugs and windshield wipers, First Brands grew rapidly from its 2013 founding and used loans to acquire 15 competitors. As of last year, the company said that it employed 26,000 people and had sales of around $5 billion.
But some of First Brands’ creditors say the auto parts empire was built on questionable accounting practices, which have drawn attention to the big banks that aided its financing. These include Jefferies, UBS and BlackRock. Last week, representatives for one of First Brand’s creditors said in a court filing that as much as $2.3 billion of assets had “simply vanished.”
Total losses could be in the billions of dollars, and the bankruptcy has sparked concerns about the fast growth over the past decade of the loosely regulated private credit market.
While First Brands held $6 billion in high-yield, or “junk” debt on its balance sheet, its current crisis stems from so-called “off balance sheet” debt from private credit lenders. This summer, when the company hired Jeffries to help renegotiate the terms of the debt on its balance sheet, its lenders began asking further questions about its finances, discovering that it had been carrying billions of dollars in additional loans.
In court filings, some of First Brands’ lenders said that this private debt had not been fully disclosed. Lenders also say that the company had pledged the future proceeds from some of its unpaid invoices to multiple creditors.
“Our immediate priority is to ensure stability and dependability for our employees, customers, and partners,” Mr. Moore, First Brands’ new leader, said in a statement. He added that the company is conducting “an investigation into the past use of various financing instruments.”
Ryan Mac covers corporate accountability across the global technology industry.
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