The fight over Fisker’s assets is already heating up
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 âoutside the courtâs supervision.â
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 companyâs 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 companyâs 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 proceedingâs first hearing on Friday that it took âtoo longâ to get to this point. He said Fiskerâs tardy regulatory filing was a âminor technical defaultâ that somehow led to the startup âbasically hand[ing] the whole business over to Heights.â
âWe believe this was a terrible deal for [Fisker] and its creditors,â Lees said at the hearing. âThe right thing to do would have been to file for bankruptcy months ago.â In the meantime, he said, Fisker has been âliquidating outside the courtâs supervisionâ for the benefit of Heights in what he said amounts to âsuspect activity.â 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 Leesâ comments were âcompletely inappropriate, completely unsupported,â and derided them as âdesigned as sound bitesâ meant to be picked up by the media.
âThere may be a lot of disappointed creditorsâ in this case, Greissman said, ânone more so than Heights.â He said Heights extended âan enormous amount of creditâ to Fisker. He added later that even if Fisker is able to sell its entire remaining inventory â around 4,300 Ocean SUVs â such a sale âwill maybe pay off a fraction of Heightsâ secured debt,â 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 Itâs 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. âI donât know why it took this long,â Linda Richenderfer, a lawyer with the US Trusteeâs 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 âgreat concernâ 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 âprobably took more timeâ than needed to file for bankruptcy protection, and that some of these quarrels could have been âmore easily resolvedâ if the case had started sooner. He even said he agrees with Richenderfer that âeven with a fleet sale, Chapter 11 may not be sustainable.â
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 âpretty cleanlyâ despite the rush of filings this week. He particularly called out the U.S. Trusteeâs office for working under âreally difficult circumstancesâ to âget their heads aroundâ the case with âminimal controversy, in the scheme of things.â
âI imagine there are a few people who want to catch up on some sleep now,â he said with a smile, as he ended the hearing.