Fisker, the electric vehicle startup, has recently filed for Chapter 11 bankruptcy. The company’s largest secured lender, Heights Capital Management, has been engaged in a heated battle over the startup’s assets. Heights loaned Fisker over $500 million in 2023, giving them considerable leverage and priority over the company’s assets.
The dispute stems from a breach of covenant by Fisker when it failed to file its third-quarter financial statements on time in late 2023. In exchange for waiving the breach, Fisker agreed to give Heights first-priority on all its current and future assets. This decision has been heavily criticized by a lawyer representing a group of unsecured creditors owed over $600 million. The lawyer claimed that Fisker should have filed for bankruptcy months ago and accused the company of engaging in suspect activity outside the court’s supervision.
However, a lawyer representing Heights argued that the comments made by the opposing lawyer were unjustified and unsupported. He emphasized that Heights had extended a significant amount of credit to Fisker and expressed doubt that even if Fisker sold its remaining inventory of around 4,300 Ocean SUVs, it would only be able to pay off a fraction of Heights’ secured debt.
The court was informed that there is an agreement in principle to sell the Ocean SUVs to an unnamed vehicle leasing company. However, it remains unclear what other assets Fisker could potentially sell to provide returns for other creditors. The company claims to have between $500 million and $1 billion in assets, but so far, only manufacturing equipment has been detailed in the filings.
The concerns expressed by the opposing lawyer were shared by a representative from the US Trustee’s Office. She questioned why it took Fisker so long to file for bankruptcy and expressed “great concern” that the case could convert to a Chapter 7 liquidation, leaving other creditors with minimal returns.
Despite the disagreements, the parties involved were commended by the judge for handling the proceedings smoothly. The next hearing is scheduled for June 27, where further discussions and decisions regarding the case will take place.
In conclusion, the bankruptcy filing by Fisker has sparked a contentious battle over its assets. The relationship between the company and its largest secured lender, Heights Capital Management, has come under scrutiny, with accusations of suspect activity and unfavorable deals. The outcome of the bankruptcy proceedings will determine the fate of Fisker’s assets and the returns for its various creditors.