Round #12.5: First Brands Perpetual...
My podcast with Joe Sarachek on First Brands bankruptcy; First Brands development; First Brand as a business; Two more questions
In Round #12.5: All Things First Brands….
1. Podcast: “Call Her Debty*”
Why am I sending my letter on Sunday? Well, a couple of reasons.
First Brands discussions have spilled from Debtageekland into the mainstream with a lot of half-facts, full speculations, and little certainty about what’s going on. So I decided to speak to someone who knows the bankruptcy process and follows the deal closely: Joe Sarachek, founder of Sarachek Law. Joe is both a veteran bankruptcy lawyer and a seasoned distressed debt investor, so I picked his brain on what we know about the deal and how bankruptcy processes typically go.
We recorded the episode on Friday morning (LISTEN HERE - FREE LINK), so keep that in mind as you listen. Given the flow of new information, I am pretty sure new facts were popping up before we even finished the recording.
I am working on a piece for you all that I’ve been eyeing for some time (unrelated to First Brands), which I’d like to complete for the anniversary of the event. As such, I won’t be sending the mid-week update…so, hence this brief letter.
*No, I didn’t name the podcast Call Her Debty…
2. Chronicle of Collapse
Bloomberg has pretty good coverage of the development with First Brands, but they’re greedy and require a subscription. I found the Bloomberg story on Yahoo for free (Free LINK), so you can use that for background. The story is from Friday, but it covers most of what’s happening. There are some fun parts like this:
Raistone, the company that called for the investigation, and that had facilitated First Brands’ short-term borrowing, derived 80% of its revenue from First Brands and has already cut roughly half of its employees.
And like this:
In 2011, a unit of Fortress Investment Group sued some of the companies and claimed that they had obscured [Patrick] James’ [founder of First Brands] controlling interest and the fact that all the companies “share employees and management, do not have separate books and records, have the same address in Solon, Ohio, and are grossly undercapitalized.” James and his businesses denied the accusations but paid to settle the case and another one alleging fraud two years earlier.
The lawsuits did not stop Wall Street from fueling James’s growing ambitions. The company, which was then known as Crowne Group, began tapping the syndicated loan market in 2014 with $380 million in loans. In 2020, it was rechristened as First Brands and borrowed more than $1 billion to fund another run of acquisitions, eventually taking the company’s long-term debt load to around $6 billion.
Fun!
3. Portrait of First Brands
A very surprising thing to me, after reading all these headlines, is that First Brands is actually a pretty decent business - if not for the leverage… alleged fraud… shady CEO… and whatever else might still come out. The court filings discuss this in great detail, but the Bondoro site provides a nice summary (Free LINK).
But one of my favorite parts was probably the DIP financing 13-week cash flow (below). I understand the company is likely seasonal and that these figures can’t be annualized to show a full-year picture… but even so, it’s no surprise the $6B financing fell apart. To be fair, what they shared is a cleaned-up version of the financials from the CRO et al., since this is all for bankruptcy…but boy, this is wild.
Moving on…
4. Who’s on First?
So, when I first discussed First Brands a couple of Rounds ago, I had a couple of questions (quoting):
Apparently, Apollo and Diameter’s CDS had a maturity of approximately 12 months, and they entered into the position in September 2024. Just to remind you, it was the FT article published earlier this month (September 2025) that caused the loan value to tank, so I find the timing of the information leak to FT very interesting.
I am also curious who is on the other side of the Apollo and Diameter trade, since those payouts will hit someone’s P&L next quarter. (Just to be clear: don’t reveal if you know, and don’t trade on this information—I’m just curious!).
I still have those questions and think they may surprise us. But based on the list of the Ad-Hoc group from the 9/28 bankruptcy filings (below - credit to Joe Sarachek and Octus), I have two more small questions:
Technically, this list includes both lenders that got screwed and opportunistic distressed funds that bought into the deal well below par (Marathon and Diameter are rumored to have bought at around 40 cents). I would love to see the list as of, say, July, to know who the incumbent lenders were.
Look at line 69… what is the State of Wisconsin doing on this list?!! I really, really hope that somehow they are the “vulture” distressed investor here (although that is unlikely)!
Anyway!
That’s the bell — round over. See you in the next.
Aznaur Midov
aznaur@yahoo.com
Absolutely insane! I was waiting for additional context because some of the mainstream stories seemed incomplete to me and/or had misinformation. Great read.
Banger “First Brands is actually a pretty decent business - if not for the leverage… alleged fraud… shady CEO… and whatever else might still come out.”