Below is our initial take on recent bankruptcy-related developments:
The auto parts supplier disclosed liabilities exceeding $10 billion when it filed for bankruptcy on Monday.
S&K Take: First Brands and its subsidiaries started to trickle into bankruptcy last week, with certain SPVs (Carnaby Capital Holdings and its affiliates) filing last Thursday in the SD Tex (where else?). It will likely take a while to unpack this case. The Debtors sport around $11.6 billion in debt, with $6 billion of “balance sheet” obligations and (you guessed it) $5 billion or so of “off-balance sheet” debt. That debt produces about $900 million in debt service annually, without accounting for a $2 billion-ish master loan agreement and the off-balance sheet obligations. The Debtors note that tariffs and other typically-cited factors led to a liquidity crisis in August, with the Debtors seeking new financing options. The stuff really hit the fan in September. Sufficient financing didn’t materialize through the process, and the Debtors’ advisors discovered “irregularities” with third-party factoring facilities. Essentially, the Debtors borrowed against certain receivables. Those would typically be sold in a “true sale” to the factor. In these cases, however, the receivables may not have been sold—instead the Debtors would be on the hook to repay the factor (rather than the factor proceeding directly against the customer), which functions as a secured loan as opposed to a true sale. This may result in $2.3 billion of Debtor obligations. On top of that, it is reported that certain receivables may have been double-factored (shades of Tricolor). So, we have some problems. The Debtors have obtained a $4.4 billion DIP proposal (with $1.1 billion of new money) from a cross-holder group, with interim approval granted on Wednesday. The Debtors have also appointed two independent directors to investigate the factoring “irregularities” and double dipping. Certain creditors have raised the possibility of seeking the appointment of an examiner or trustee regardless, as the board is still populated by potential wrongdoers (notably, it does not appear that the independents have independent counsel). This should be interesting.
A report found that bankruptcy filings for companies with assets exceeding $1 billion totaled 32 in 2025, increasing from 24 in the previous period.
S&K Take: Always have to take these reports with a grain of salt, as they lag in timing and often don’t reflect how “busy” restructuring professionals may be, but there has definitely been an uptick in larger case filings which has now continued into the 4th quarter. Spirit’s (sort of) chapter 22, Anthology, First Brands, and even Tricolor have recently filed “mega-cases” adding to the list. Unsurprisingly, inflation is blamed most frequently, along with the attendant decrease in consumer spending. Some of the recent cases (Tricolor and First Brands) have highlighted potential fraud, layering in some complexity. Middle market cases (assets greater than $100 million) have been flat or the same period, although that is still elevated from the annual average. Given the macro uncertainty and volatility, it seems as though more of the same is likely going forward into 2026.
Upon pending court approval of its debtor-in-possession financing agreement, the budget airline would immediately be able to access $200 million.
S&K Take: Speaking of Spirit, the airline has been busy in its chapter (whatever) case, filing a motion for approval of a $1.33 billion DIP yesterday. The facility would be provided by existing senior secured noteholders and would include $475 million in new money (with a little less than a 2:1 roll-up). The DIP would be funded in 4 draws, with those contingent on certain events (such as approval of the AerCap settlement, which also hit the headlines recently). No word yet from the Committee on the facility, so we will see what happens.