Fisker asks bankruptcy court to sell its EVs at average of $14,000 each

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

If approved by the judge, Fisker would be able to offload 3,231 finished EVs to a New York-based vehicle leasing company for $46.25 million. That works out to around $14,000 per vehicle -- a steep fall from the roughly $70,000 starting price some of them once commanded. It's also lower than the bargain-bin prices Fisker was offering during its descent into bankruptcy.

The motion requesting approval of the sale could become the next flashpoint in Fisker's Chapter 11 bankruptcy proceedings. Lawyers representing the company's unsecured lenders already expressed concern in the first hearing, held on June 21, that they would not see the proceeds of such sales. Fisker owes around $1 billion in total to all of its unsecured creditors.

The total scope of Fisker's other assets and what value they might hold is also not clear; on Monday, lawyers for the startup filed a motion to delay the release of that information, in part because it's still being compiled.

The leasing company -- which The Wall Street Journal first reported to be a company called American Lease -- mainly offers its vehicles to ride-hail drivers in the New York City area, where fleets need to be zero-emission by 2030. The company has agreed to wait to lease any of the Oceans until the open recalls are addressed.

American Lease initially agreed to buy 2,100 Ocean EVs on May 30, just two weeks before Fisker filed for Chapter 11 bankruptcy protection. It increased that offer to buy all 3,231 Oceans that are ready-for-sale and configured for North America on June 30. (The deal excludes Canadian-configured vehicles located in Canada.) American Lease cannot re-sell the vehicles for 12 months. It's technically buying the Oceans on a sliding scale, paying $3,200 for previously-titled vehicles and $16,500 for ones in "good working order." It's also buying damaged ones for $2,500 each.

Lawyers for the company are trying to move the sale through quickly. In a motion requesting expedited approval of the sale, they wrote that they will "be unable to fund vital business expenses ... necessary to effectuate an orderly liquidation" if it is not completed by July 12.

Lawyers for Fisker said in an emergency hearing Wednesday that they want to sell an initial 200 Oceans to American Lease by July 12 in order to generate $2.8 million to cover payroll and other expenses. Before it does that, though, it will have to resolve a newly-reported problem with the water pumps on the Ocean. That will be handled by some of the remaining Fisker employees, as the startup still has 179 employees (the majority being salaried) on the payroll but is reducing headcount to around 138, chief restructuring officer John DiDonato said.

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 "undertaking a modification" and possibly "some deferrals."

Linda Richenderfer, a lawyer for the U.S. Trustee's office, said during the hearing that she was concerned at how fast Fisker's lawyers were trying to push through the sale of the vehicles, given that the committee of unsecured creditors still don't have legal representation. (Her concerns were echoed by a lawyer representing the newly-formed Fisker Owners Association, and one representing U.S. Bank, which is owed more than $600 million.) She also said Fisker had given the impression it would be weeks before they'd try to approve a sale order, something that one of the startup's lawyers pushed back on.

During the hearing, Richenderfer grilled DiDonato on whether Fisker could make its upcoming payroll payments with whatever cash it has on hand. Both he and a lawyer for Fisker said that won't be possible, but they struggled to clearly explain to Richenderfer -- and to the court -- the exact amount and cadence of the startup's obligations over the next few weeks.

"I'm thoroughly confused," Judge Thomas Horan said after DiDonato stepped off the (virtual) witness stand. He permitted a 30-minute recess for the two sides to get a better understanding. When court resumed, and he asked whether the time was useful, Richenderfer said bluntly: "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 push the sale through so quickly.

Once a sale is complete, Fisker will have "no obligation of repair or maintenance of the Vehicles, and Vehicles will be sold 'as is' with no express or implied warranties," according to the agreement. Fisker also will have "no obligation to update the" vehicles beyond the 2.1 version of its software. Fisker will also give American lease license to access "all relevant source code or other proprietary software operating elements."

The inventory sale has been blessed by Fisker's largest secured creditor, Heights Capital Management, an affiliate of financial services company Susquehanna International Group. Heights loaned Fisker more than $500 million in 2023, and the EV startup still owes nearly $190 million. A lawyer representing Heights' investment arm said in the June 21 hearing that the sale would "maybe pay off a fraction of Heights’ secured debt" -- now we have a clearer picture of the math he was running in his head at the time.

Heights' loans to Fisker were originally not 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 was late in filing its third-quarter financial report to the Securities and Exchange Commission last year, that technically breached one of the covenants of the deal with Heights. To repair that breach, Fisker pledged all of its assets as collateral for the remaining debt.

Alex Lees, a lawyer who represented an informal group of the unsecured lenders, said at the first hearing that this was a "terrible deal for [Fisker] and its creditors." Lees and Richenderfer expressed "great concern" that the case could transition to a more straightforward Chapter 7 liquidation following the sale of the Ocean inventory. In that scenario, unsecured creditors could wind up fighting over even less.

Updated with information from an emergency hearing held Wednesday afternoon.