Welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, Jan. 30. In today's briefing, federal prosecutors charged First Brands Group founder Patrick James and his brother for allegedly deceiving the Wall Street lenders who he used to build an auto-parts empire. Elsewhere, the parent of Saks will mostly close its discount stores, and renewed questions about the accuracy of disclosures in the booming private-credit market.

First Brands founder Patrick James charged with defrauding Wall Street of billions. First Brands Group founder Patrick James and his brother Edward were charged by federal prosecutors with defrauding lenders ahead of the auto-parts company’s collapse into bankruptcy.

Patrick James, whose empire of automotive aftermarket brands filed for chapter 11 in September, was accused by federal prosecutors in New York of “a series of fraudulent schemes against the company’s lenders and financing partners.” First Brands is now flirting with liquidation, shutting down certain business lines and keeping others afloat with emergency financing from customers.

Patrick and Edward James, a former First Brands executive, were charged with federal crimes including bank fraud, wire fraud and conspiracy to commit money laundering, according to an indictment unsealed Thursday.

Federal prosecutors alleged that as part of the defendants’ schemes, First Brands faked and falsely inflated invoices, double- and triple-pledged loan collateral, falsified financial statements, and concealed substantial liabilities from lenders.

Saks to close most of its discount stores. The parent of Saks Fifth Avenue said it will close most of the retailer’s discount chain, Saks Off 5th, as the company restructures its business after filing for bankruptcy. The move is designed to let Saks Fifth Avenue and Neiman Marcus focus more fully on their luxury clientele with the goal of selling more items at full price, said Saks Global Chief Executive Geoffroy van Raemdonck.

Dental-service group Affordable Care hires turnaround adviser for restructuring. Affordable Care LLC, one of the nation’s largest dental-service organizations, has hired restructuring advisers from AlixPartners for advice, according to people familiar with the matter. Affordable Care has been struggling to service debt stemming from a 2021 leveraged buyout by private-equity firm Harvest Partners that valued the business at about $2.7 billion, the people said.

But the fund’s managers had marked most of the same investments at or near cost in financial releases as recently as November, underscoring risks faced by investors inside the opaque private-credit world. It can be difficult to know what investments are worth at any given time, given that they hardly ever trade and are valued by fund managers using a mix of internal analysis and third-party services.
 

Office Property Income Trust rewrites DIP loan. A bankruptcy judge approved a revised $125 million financing package for Office Properties Income Trust on Thursday after rejecting an earlier version opposed by a rival creditor group.

Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston had initially ruled that the original debtor-in-possession loan proposal would hinder OPI’s business judgment and his court’s oversight of the chapter 11 case.

To address the judge’s concerns, OPI and its 2029 noteholders including Helix Partners and Redwood Capital decoupled the DIP loan from their restructuring support agreement. The revised terms give OPI more autonomy over litigation settlements and loan repayment. The DIP loan can be converted into equity upon OPI’s exit from bankruptcy, but the company’s enterprise value will now be determined through a formal valuation trial.

A group of 2027 noteholders has objected to the DIP proposal, arguing that their competing proposal was superior. The group remains against the revised plan. Andrew Leblanc, a lawyer for the 2027 noteholders, said they "may very well appeal" Thursday’s ruling.—Akiko Matsuda

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Alicia McElhaney; Andrew Scurria; Becky Yerak. 

Follow us on X: @gladstonea; @jodixu; @AskAkiko; @AliciaMcElhaney; @AndrewScurria; @beckyyerak.