Fisker asks bankruptcy court to sell its EVs for an average of $14,000 per vehicle

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Fisker has found a willing buyer for its remaining all-electric Ocean SUV, and has asked the Delaware Bankruptcy Court judge overseeing its Chapter 11 case to approve the sale.

If the judge approves it, Fisker will be able to sell 3,231 finished EVs to a New York-based vehicle leasing company for $46.25 million. That works out to about $14,000 per vehicle — well below the $70,000 starting price of some vehicles. It’s also less than the affordable prices Fisker was offering during bankruptcy.

The motion requesting approval of the sale could become the next issue in Fisker’s Chapter 11 bankruptcy proceedings. Lawyers representing the company’s unsecured creditors had already expressed concern at the first hearing held on June 21 that they would not receive the proceeds of such a sale. Fisker owes all of its unsecured creditors a combined total of about $1 billion.

The total scope of Fisker’s other assets and their value also is unclear; on Monday, the startup’s lawyers filed a motion to delay the release of that information, partly because it’s still being compiled.

The leasing company — which The Wall Street Journal first reported is called American Lease — primarily provides its vehicles to ride-hail drivers in the New York City area, where fleets are required to be zero-emissions by 2030. The company has agreed to wait to lease any Oceans until the open recalls are resolved.

American Lease agreed to buy 2,100 Ocean EVs on May 30, just two weeks before Fisker filed for Chapter 11 bankruptcy protection. It extended that offer to buy all 3,231 Oceans built and ready for sale in North America on June 30. (The deal does not include Canadian-configured vehicles located in Canada.) American Lease can’t resell the vehicles for 12 months. It’s technically buying Oceans on a sliding scale, paying $3,200 for previously titled vehicles and $16,500 for vehicles in “good working condition.” It’s also buying damaged vehicles for $2,500 per vehicle.

The company’s lawyers are trying to push the sale through as quickly as possible. In a motion requesting prompt approval of the sale, they wrote that if it isn’t completed by July 12 they “will be unable to fund the critical business expenses necessary to effect an orderly liquidation.”

Fisker’s lawyers said at an emergency hearing Wednesday that it wants to sell the initial 200 Oceans to American Lease by July 12 to raise $2.8 million to cover payroll and other expenses. Before it can do that, though, it must solve a newly reported problem with the water pumps on the Oceans. That will be handled by some of Fisker’s remaining employees, as the startup still has 179 employees (mostly salaried) on the payroll, but the headcount is being reduced to about 138, said Chief Restructuring Officer John DiDonato.

DiDonato confirmed that CEO and founder Henrik Fisker, as well as co-founder, CFO and COO Geeta Gupta-Fisker, are still on the payroll, though he did not say how much they are making. He said their salaries are being “revised” and possibly “some deferrals.”

Linda Richenderfer, a lawyer for the U.S. Trustee’s office, said during the hearing that she was concerned about how quickly Fisker’s lawyers were trying to push through the sale of the vehicles, given that the unsecured creditors’ committee still did not have legal representation. (Her concerns were reiterated by a lawyer representing the newly formed Fisker Owners Association and a lawyer representing U.S. Bank, which is owed more than $600 million.) She also said Fisker had given the impression it would take several weeks before it would approve the sale order, which one of the startup’s lawyers objected to.

During the hearing, Richenderfer asked DiDonato if Fisker could make its upcoming payroll payments with the cash it had on hand. He and Fisker’s lawyers said that wouldn’t be possible, but they struggled to clearly explain to Richenderfer and the court what the exact amount and cadence of the startup’s obligations would be over the next few weeks.

“I’m totally confused,” Judge Thomas Horan said after DiDonato stepped off the (virtual) witness stand. He gave both sides a 30-minute recess to gain a better understanding. When court resumed and he asked if the time was useful, Richenderfer said flatly: “No.”

A new hearing has been set for July 11. In the coming week, it will be up to Fisker and the restructuring officer to better explain to Richenderfer and the many unsecured creditors why they need to pursue the sale so quickly.

According to the agreement, once the sale is completed, Fisker “will have no obligation to repair or maintain the vehicles, and the vehicles will be sold ‘as is’, without any express or implied warranty.” Fisker “will have no obligation to update” the vehicles beyond version 2.1 of its software. Fisker will also lease licenses to American to access “all relevant source code or other proprietary software operating elements”.

The sale of the inventory has been approved by Fisker’s largest secured creditor, Heights Capital Management, an affiliate of financial services company Susquehanna International Group. Heights lent Fisker more than $500 million due in 2023, and the EV startup still owes about $190 million. A lawyer representing Heights’ investment arm said at a June 21 hearing that the sale would “probably repay a fraction of Heights’ secured debt” — now we have a clearer picture of the math going on in their minds at the time.

Heights’ loans to Fisker weren’t originally secured by any collateral — they were convertible notes that could either be paid back or swapped for stock in the EV startup. But when Fisker delayed filing its third-quarter financial report to the Securities and Exchange Commission last year, it technically violated one of the terms of the deal with Heights. To fix that violation, Fisker pledged all of its assets as collateral for the remainder of the loan.

Alex Lees, a lawyer representing an informal group of unsecured creditors, said at the first hearing that it was “a terrible deal for (Fisker) and its creditors.” Lees and Richenderfer expressed “great concern” that the case could turn into a more straightforward Chapter 7 liquidation after the sale of Ocean inventory. In that scenario, unsecured creditors could fight for even less.

It has been updated based on information from an emergency hearing held Wednesday afternoon.

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