NEW YORK: When First Brands Group tried to refinance about US$6bil of debt over the summer, the auto-parts supplier lined up Banco Santander SA to work with Jefferies Financial Group Inc on the deal, according to people with knowledge of the matter, before it was shelved following investor concern.
The Spanish bank signed an engagement letter to work with Jefferies on the refinancing effort, before investors requested a quality of earnings report and some pressed for more information about the company’s off-balance-sheet borrowing.
While the refinancing pitch was advertised as being led by Jefferies, Santander had a pre-existing relationship with the company.
Last year, First Brands attempted to raise new debt financing to support separating its operations outside of North America, including in Europe, Asia, Africa and Latin America, into a new, standalone entity, the auto-parts supplier said in its bankruptcy declaration last month.
To help finance the effort, the firm sought to raise €1.3bil to €1.5bil of debt, a process that Santander led, according to the filing.
Santander has been betting on investment banking in the United States since at least 2021, when it agreed to buy Amherst Pierpoint Securities.
It has embarked on a hiring spree, including taking on a significant number of executives from now-defunct Credit Suisse Group AG.
Leveraged finance is one asset class that Santander has been particularly focused on, with former Credit Suisse banker Jeff Cohen helming the unit.
First Brands eventually dropped its endeavour to separate its non-US businesses “after not receiving sufficient interest from potential lenders, including as a result of external factors and a changing geopolitical environment”, chief restructuring officer Charles Moore said in the court filing.
When First Brands filed for bankruptcy on Sept 28, it had a US$77mil loan from Santander tied to an entity that is not part of the US business and not involved in the Chapter 11 proceedings.
The Wall Street Journal first reported Santander’s exposure. — Bloomberg
