First Brands Is Great Company With Bad Balance Sheet, Says Marathon's Richards

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Transcript

00:00You know, you asked the question, and so I'll give you the answer.

00:03This is your classic distress scenario.

00:05Great company, bad balance sheet.

00:08And so Marathon is very involved in First Brands, as you know.

00:12We're leading the steering committee of other creditors,

00:15working with the company, working with the other creditors,

00:19working with Alvarez Marcel, who is the restructuring advisor,

00:22who's come in to administer this.

00:25And they have great brands is the bottom line.

00:28And so you look at Morelli, which is the other sort of part supplier

00:33that filed for bankruptcy earlier this year,

00:35where Marathon led that dip loan and backstopped that with Deutsche Bank.

00:38Also a legendary name in Autoworks.

00:40And that's a great name, great company, but over-levered.

00:44And so they were forced into restructuring, but they were selling to the OEMs.

00:49They were selling to Nissan, Stellantis, Chrysler, as new parts.

00:54Where First Brands comes in, they sell to O'Reilly and to AutoZone.

01:00When you go in and buy in the aftermarket, they use parts.

01:03And they have the top brands across the industry.

01:06And so whether you're buying the filters or the spark plugs or whatever you're buying,

01:10chances are it's a First Brand.

01:12And so First Brands is a great company with a balance sheet,

01:16where some irregularities evidently came to light that were off balance sheet,

01:20that shocked the market.

01:21And so Marathon came in and bought in the secondary market.

01:25They don't have high-yield bonds.

01:26It's all bank debt.

01:27And so we bought the first lien bank debt, very large size, in the 40s.

01:32And we feel good about that position because we think it's a great company.

01:35It needs to be restructured.

01:37And we also came in and led to dip financing.

01:40It's a $1.1 billion dip facility.

01:43And Marathon led that dip facility to help the company through bankruptcy.

01:47So our job at Marathon is to help this great company exit bankruptcy as soon as possible

01:53so they can go on with a proper accounting system and do the great things they did do,

01:59which is supply all the sparks to people around this country and around the world.

02:04It's a global firm with global brands.