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One major dissenter threatens to upend Fisker’s apparent best chance at offloading its unsold EVs, a deal that would keep the startup’s bankruptcy proceeding alive and pave the way for paying pack creditors some of what they’re owed.
The objection to the sale comes from the office of the U.S. Trustee, an arm of the Department of Justice that oversees the administration of bankruptcy, with the stated mission of promoting “the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders.”
But Fisker has a raft of support for the deal, which could max out at around $46.25 million and would see all of the Ocean SUVs configured for the North American market go to a company called American Lease that services ride-hail drivers in the New York City area.
A hearing is scheduled for Tuesday morning where the parties will make arguments in front of a Delaware Bankruptcy Court judge, who will likely decide whether or not to approve the sale.
Fisker’s support for the deal is broad. The company’s biggest secured lender wants it to go through. The committee of unsecured creditors, which covers parties who are owed money like Fisker’s contract manufacturer Magna, also approves of the sale. The newly-formed Fisker Owners Association wants the sale to happen, too — but on the condition that Fisker, American Lease and the secured lender promise to make spare parts available and provide more clarity on how they plan to address an open recall regarding the Ocean’s water pump.
Fisker says it needs the sale to go through soon to provide a financial buffer that will keep the bankruptcy proceeding alive while the creditors fight over what’s left. The vehicle sale is also crucial because the total scope of Fisker’s other assets — and what value they might hold — is still not clear. The company has claimed to have total assets between $500 million and $1 billion, but it has asked the court to delay the release of that information because it’s still being compiled.
The Trustee’s office submitted a filing to the Delaware Bankruptcy Court late last Thursday laying out its reasons why the sale shouldn’t go through as constructed, though.
The objection from the Trustee’s office largely echoed concerns it raised in the hearings that have been held to date. Its lawyers wrote that Fisker provided “no information” about whether it tried to shop around the fleet to other potential buyers, how it marketed the sale, or how it valued the vehicles. It accused Fisker of “offering their fleet inventory to this buyer at fire sale prices without adequate marketing that would maximize value.” And it chastised the company for trying to rush through the sale, including scheduling an emergency hearing on the day before the July 4th holiday.
Fisker “sought a sale hearing for their ‘crown jewel’ assets on one week’s notice over a federal holiday and are exclusively pursuing a private sale to one buyer without any efforts to notify other potential purchases,” lawyers for the Trustee’s office wrote.
Lawyers for Fisker, along with the startup’s chief restructuring officer John DiDonato, previously told the court in that emergency hearing a rush sale was required in order to make payroll and keep the bankruptcy proceeding alive. But after a grilling from one of the U.S. Trustee’s lawyers, DiDonato and Fisker’s counsel took another look at the startup’s meager assets, were able to put some costs off — including founders Henrik Fisker and Geeta Gupta-Fisker reducing their salaries to $1 — and decided they could wait another week or two to allow more input on the sale.
The Trustee’s office also asked in its objection for more information about why American Lease initially agreed to buy 2,000 Oceans on May 30 — before the bankruptcy — for a much higher average price, which would have netted Fisker around $40 million.
The only other entity that objected to the sale by last Thursday’s 5 p.m. ET deadline was Ideal Motors, one of the dealer partners that Fisker signed on earlier this year. Ideal argues that it wasn’t properly notified of the proposed sale, and said “the speed here appears to be nearly unprecedented.”
Despite putting another potential buyer on the table — a development that was revealed in the most recent hearing on July 9 — the committee of unsecured creditors says it now supports the sale to American Lease.
“The Committee believes that the [Ocean SUVs] were adequately marketed, that the Fleet Sales Agreement constitutes the highest and best offer for the [Ocean SUVs] that [Fisker] could secure under the circumstances, and that the Sale Transaction maximizes the value of the Debtors’ estates for the benefit of all stakeholders,” the committee’s lawyers wrote in a Sunday filing.
