A federal bankruptcy judge in Texas has rejected First Brands Group’s Chapter 11 bankruptcy plan over concerns about how the company proposed paying at least $222 million in administrative debts accumulated during bankruptcy.
First Brands was the parent company of Champion Laboratories in Albion and several other auto parts manufacturers. The company filed for bankruptcy last September with just $14 million in cash and more than $9 billion in liabilities.
First Brands has since sold several business operations, including Champion Labs, but raised only a fraction of what it owes creditors.
Under the rejected plan, First Brands proposed establishing litigation trusts to pursue lawsuits and potentially recover additional money. However, those lawsuits would need to generate about $1.9 billion before administrative claims could be fully repaid.
U.S. Bankruptcy Judge Christopher Lopez rejected the proposal.
Meanwhile, First Brands founder Patrick James and his brother Edward James were indicted in January on federal fraud charges related to the company’s collapse. Both have pleaded not guilty and remain free on bond pending trial in New York.