First Mode Holdings, a Seattle-based developer of hybrid electric equipment for heavy industry, has filed for Chapter 11 bankruptcy in Delaware, citing nearly $98 million in debt and challenges in securing customers for its hydrogen-fueled products. The filing, submitted Sunday, outlines a plan to sell its assets with the support of its parent company, Anglo American, and secured lender.

Agreement with Anglo American and Cummins Inc.

The mining giant Anglo American has agreed to provide $26 million in debtor-in-possession (DIP) financing to support First Mode through the bankruptcy process. As part of the arrangement, the company will conduct an asset auction on January 27, with a $15 million stalking horse bid already in place from Cummins Inc., a leading manufacturer of engines and power systems.

Chief Financial Officer Colin Mark Freed noted in court documents that the bankruptcy filing provides a structured path toward a value-maximizing sale, followed by a plan to liquidate the remaining estate.

Origins and Financial Troubles

First Mode was founded in 2018 to create hybrid and fully electric engines for industrial hauling vehicles, particularly in mining and rail. Despite initial advancements, the company struggled to attract sufficient commercial interest, leading to significant financial strain.

The company’s debts include $70.7 million in secured obligations to Anglo American and approximately $27 million in unsecured trade debt.

Bankruptcy Auction Details

The auction process, anchored by Cummins' stalking horse bid, aims to ensure a competitive sale. Anglo American has agreed to subordinate its claims to prioritize the sale's success, which is intended to pave the way for an orderly wind-down.

Legal and Financial Advisors

First Mode has enlisted a team of advisors to navigate the bankruptcy and sale process. PJT Partners serves as its investment banker, with M3 Partners providing financial advisory services. Legal representation is being handled by:

Latham & Watkins LLP: Ray C. Schrock, Annemarie V. Reilly, Brian S. Rosen, Caroline Reckler, and Jeffrey T. Mispagel

Young Conaway Stargatt & Taylor LLP: Michael R. Nestor, Kara Hammond Coyle, and Joseph M. Mulvihill

Next Steps

The bankruptcy court will oversee the asset auction and the subsequent liquidation plan. If the sale is successful, it could allow First Mode to recover value for creditors while transitioning its technology to a new owner.