A major financier of First Brands Group is facing accusations of orchestrating a kickback scheme that allegedly burdened the now-bankrupt auto-parts supplier with exorbitant debt. Creditors alleged in a court filing Monday that Onset Financial Inc. exploited its relationship with Edward James, the brother of First Brands founder Patrick James, to implement usurious financing arrangements.

The filing claims that Onset Financial, having advanced First Brands Group no more than $2.5 billion, has already recouped approximately $2.9 billion. Furthermore, Onset is seeking an additional $1.9 billion through claims filed in the bankruptcy proceedings. The loans in question, characterized by short maturities of less than a year and substantial upfront payments, reportedly generated average internal rates of return exceeding 300%.

The allegations against Onset Financial could send ripples through the asset-based lending market, potentially increasing scrutiny on short-term, high-interest financing deals, particularly those involving distressed companies. Such arrangements, while providing immediate capital, can quickly become unsustainable if not managed carefully, potentially accelerating a company's decline.

First Brands Group, a supplier of auto parts, filed for bankruptcy protection after struggling with a heavy debt load and operational challenges. The company's collapse highlights the risks associated with aggressive financial strategies, especially in cyclical industries like automotive.

The bankruptcy court will now need to assess the validity of the creditors' claims and determine the extent to which Onset Financial's lending practices contributed to First Brands Group's financial distress. The outcome of the case could set a precedent for future disputes involving complex financing arrangements and the responsibilities of lenders in bankruptcy situations.