Dietrich Knauth
NEW YORK (Reuters) – Electric vehicle startup Fisker (OTC:) is on track for liquidation, lawyers said in U.S. bankruptcy court on Friday, as two factions of creditors discussed a battle over which group would get paid first.
Fisker filed for bankruptcy protection in Delaware on Monday after spending money in an attempt to ramp up production of its Ocean SUV. The company initially said it would seek additional financing and continue to “reduce operations,” but Fisker’s attorney, Brian Resnick, said at a hearing in Wilmington that the company “does not currently anticipate being able to obtain financing.”
Resnick told US bankruptcy judge Thomas Horan that the company planned to liquidate its assets and had reached a tentative deal with one buyer for all of its 4,300 vehicles.
The California-based company, founded by car designer Henrik Fisker, has never been profitable, with revenue of about $273 million in 2023 and a net loss of $940 million.
Fisker owes more than $850 million to two groups of bondholders, and lawyers for the larger group have accused a minority faction led by Heights Capital Management of seizing control of Fisker’s debt in November through a “suspicious” deal with Fisker.
At the time, Fisker was late in providing audited financial statements under its debt agreements, and Heights used that “minor technical default” to demand all of Fisker’s assets as collateral for its bonds, said Alex Lees, an attorney for the other bondholders. .
“They basically handed over the entire business to Heights,” Lees told Horan. “Fisker conducted the liquidation outside of court supervision, primarily for the benefit of one creditor.”
Lees said Fisker was expected to file for bankruptcy in November. His group intends to challenge a November agreement that put Heights at the forefront of paying off debt in Fisker’s bankruptcy, Lees said.
Hites’ attorney, Scott Greissman, called Lees’ statement “outrageous” and that Hites was trying to help Fisker survive.
“There may be a lot of frustrated lenders, but none more so than Heights,” Greissman said.
Greisman said the expected sale of Fisker’s fleet would cover only a “fraction” of Heights’ $185 million in debt. This will leave little hope of repaying other creditors.
Linda Richenderfer, an attorney with the U.S. Justice Department’s bankruptcy watchdog, said Heights appears to have all the leverage, making it likely that Fisker’s bankruptcy will escalate into a simple Chapter 7 liquidation after the fleet sale.
The Heights “gets everything it wants,” Richenderfer said. “There’s no reason for him to agree to anything more next week.”
Fisker’s fate was sealed in March when it failed to reach a partnership with a major automaker, which Reuters reports is Nissan (OTC:). Before that failed, Fisker suspended production and laid off staff to save money, Resnick said.
In the hypercompetitive electric vehicle market, several companies have filed for bankruptcy over the past two years, including Proterra, Lordstown and Electric Last Mile Solutions, as they grappled with weakening demand, fundraising difficulties and operational challenges stemming from global supply chain issues.