Fisker is just a few days into its Chapter 11 bankruptcy, and the fight over its assets is already charged, with one lawyer claiming the startup has been liquidating assets “outside the court’s supervision.”

At issue is the relationship between Fisker and its largest secured lender, Heights Capital Management, an affiliate of financial services company Susquehanna International Group. Heights loaned Fisker more than $500 million in 2023 (with the option to convert that debt to stock in the startup) at a time when the company’s financial distress was looming behind the scenes.

That funding was not originally secured by any assets. That changed after Fisker breached one of the covenants when it failed to file its third-quarter financial statements on time in late 2023. In exchange for waiving that breach, Fisker agreed to give Heights first-priority on all of its current and future assets, giving Heights considerable leverage. Heights not only gained pole position to determine what happens to the assets in the Chapter 11 proceedings, but also gave them the chance to tap a preferred restructuring officer to oversee the company’s slow descent into bankruptcy.

Alex Lees, a lawyer from the firm Milbank who represents a group of unsecured creditors owed more than $600 million, said in the proceeding’s first hearing on Friday that it took “too long” to get to this point. He said Fisker’s tardy regulatory filing was a “minor technical default” that somehow led to the startup “basically hand[ing] the whole business over to Heights.”

“We believe this was a terrible deal for [Fisker] and its creditors,” Lees said at the hearing. “The right thing to do would have been to file for bankruptcy months ago.” In the meantime, he said, Fisker has been “liquidating outside the court’s supervision” for the benefit of Heights in what he said amounts to “suspect activity.” Fisker has spent the run-up to the bankruptcy filing slashing prices and selling off vehicles.

Scott Greissman, a lawyer representing the investment arm of Heights, said Lees’ comments were “completely inappropriate, completely unsupported,” and derided them as “designed as sound bites” meant to be picked up by the media.

“There may be a lot of disappointed creditors” in this case, Greissman said, “none more so than Heights.” He said Heights extended “an enormous amount of credit” to Fisker. He added later that even if Fisker is able to sell its entire remaining inventory — around 4,300 Ocean SUVs — such a sale “will maybe pay off a fraction of Heights’ secured debt,” which currently sits at more than $180 million.

Lawyers told the court Friday that they have an agreement in principle to sell those Ocean SUVs to an unnamed vehicle leasing company. But It’s not immediately clear what other assets Fisker could sell in order to provide returns for other creditors. The company has claimed to have between $500 million and $1 billion in assets, but the filings so far have only detailed manufacturing equipment, including 180 assembly robots, an entire underbody line, a paint shop and other specialized tools.

Lees was not alone in his concern over how Fisker wound up filing for bankruptcy. “I don’t know why it took this long,” Linda Richenderfer, a lawyer with the US Trustee’s Office, said during the hearing. She also noted that she was still reviewing new filings late Thursday and in the hours before the hearing.

She also expressed “great concern” that the case could convert to a straight Chapter 7 liquidation following the sale of the Ocean inventory, leaving other creditors fighting for scraps.

Greissman said at one point that he agreed that Fisker “probably took more time” than needed to file for bankruptcy protection, and that some of these quarrels could have been “more easily resolved” if the case had started sooner. He even said he agrees with Richenderfer that “even with a fleet sale, Chapter 11 may not be sustainable.”

The parties will meet again at the next hearing on June 27.

Before he dismissed everyone, Judge Thomas Horan thanked all the parties involved for getting to the hearing “pretty cleanly” despite the rush of filings this week. He particularly called out the U.S. Trustee’s office for working under “really difficult circumstances” to “get their heads around” the case with “minimal controversy, in the scheme of things.”

“I imagine there are a few people who want to catch up on some sleep now,” he said with a smile, as he ended the hearing.