Judge OKs Fisker plan to liquidate its Ocean EVs for $14,000 apiece

Fisker has been given the green light by a bankruptcy judge to sell more than 3,000 of its Ocean SUVs to a vehicle leasing company, a deal that will net the defunct EV startup a maximum of $46.25 million, or about $14,000 apiece. The approval of the sale clears the way for the rest of Fisker’s bankruptcy process to play out as it continues to liquidate what’s left of its failed business.

The judge’s decision, issued in a hearing late Tuesday afternoon, comes after Fisker and its legal team received only one major objection to the sale. The Department of Justice’s office of the U.S. Trustee had argued Fisker’s lawyers and its chief restructuring officer, John DiDonato, hadn’t done enough work to show it properly shopped the inventory around for the best deal. The Trustee’s office also said Fisker did not properly explain how it reached the valuation for the vehicles, and was unhappy with how fast its lawyers tried to get the deal done.

DiDonato answered each point in greater detail in a Tuesday morning filing. He explained that Fisker had contacted “hundreds” of potential buyers for the stockpile of Ocean SUVs prior to its mid-June bankruptcy filing, “including dealerships, rental car companies, taxicab operators, and participants in the ride-share leasing industry.”

The returns on that effort were pretty grim, however. The only solid lead Fisker turned up was American Lease, the company that is now buying the inventory.

One unnamed vehicle manufacturer and an unidentified company that leases vehicles to ride-hail drivers were interested in the fleet after the bankruptcy filing, but according to DiDonato, that interest was fleeting. The committee of unsecured creditors also found an interested buyer, which was first revealed last week. DiDonato described that potential buyer as a competitor to American Lease, but noted they have withdrawn their offer.

Given all this, Judge Brendan L. Shannon agreed that DiDonato and Fisker had done as much as it could to find the best possible bid. He called American Lease “functionally a purple unicorn” since they are not only buying the cars, but agreeing to wait until the four pending recalls are cleared before operating them, performing some work on them itself and working with the newly formed Fisker Owners Association to make spare parts and software support available to 2,500-plus owners.

Shannon thanked the U.S. Trustee’s office for pushing DiDonato to share more information, which he said helps establish a more robust record of how Fisker arrived at this point where American Lease is the best, and lone, option.

In the next few days, Fisker will sell around 1,000 Ocean SUVs to American Lease and receive around $14 million in return. Another 500 are likely to be handed over to American Lease next week, bringing in another $6 million.

That money will be used to keep paying the remaining employees who are working on the recalls, getting software updates out and facilitating the continued sales of the vehicles.

Where the rest of the money Fisker gets from American Lease remains under dispute, as it has from the first hearing in June.

Fisker’s largest — and only — secured lender is Heights Capital Management, an affiliate of financial services company Susquehanna International Group. Heights loaned more than $500 million to Fisker in 2023. Those loans were not secured by any collateral, but could be converted to Fisker stock. But when Fisker’s third-quarter financial filing was late in 2023, the company breached one of the covenants of the deal with Heights.

To repair that breach, Fisker secured the remaining balance outstanding to Heights by pledging all of its assets as collateral. Heights has repeatedly asserted through the bankruptcy process that this gives them first dibs on any sale of Fisker’s assets.

Chapter 7 looms

During Tuesday’s hearing, it was revealed that Heights plans to file a motion to convert the Chapter 11 to a Chapter 7 liquidation. The company, the U.S. Trustee, the committee of unsecured creditors and other parties were able to negotiate with Heights that it won’t ask a judge to approve that motion until at least July 29.

Heights’ lawyers have made it clear that they view this case as a liquidation. Scott Greissman, one of the Heights’ lawyers, said Tuesday this was “probably the most telegraphed chapter 7 conversion in history.” He added the firm wants to liquidate Fisker’s assets as efficiently as possible without spending as much money as it takes to run a Chapter 11 process.

Lawyers for the committee of unsecured creditors, and the U.S. Trustee’s office, have challenged Heights’ claim to the assets in multiple hearings to date. But those arguments have mostly been made at a superficial level because the priority — for pretty much every party — has been getting the fleet sale approved (and making sure the process was proper) so that the company didn’t completely fold.

Based on that fateful 2023 asset pledge, though, Heights’ claims could extend to Fisker’s many other assets beyond the remaining Ocean inventory. The company still has hundreds of millions of dollars’ worth of factory equipment sitting in Austria (where contract manufacturer Magna’s facility is located). The corporate entity that oversaw that part of the business, Fisker GmbH, is in its own insolvency proceeding.

That has apparently caused some tension. Fisker Austria GmbH wanted to include those vehicles in its own insolvency. DiDonato said he had to negotiate with Fisker Austria GmbH to include the 118 Oceans at the factory and another 480 at a nearby port in Belgium in the fleet sale to American Lease. That involved working with the administrators of that insolvency process as well as founder, CFO and COO Geeta Gupta-Fisker.

Linda Richenderfer, a lawyer representing the U.S. Trustee’s Office, said she found this “particularly disturbing,” given Gupta-Fisker’s fiduciary duty to the parent company Fisker Inc. Both Gupta-Fisker and her husband, founder and CEO Henrik Fisker, are still employed by the company.

It was also revealed Tuesday that Heights has submitted a $1 billion claim on the assets in the Fisker Austria GmbH proceeding.

As the vehicle sales start to flow to American Lease, the parties will now turn their attention to the next hearings — one on July 22 and another July 29.

“It’s important that [Fisker] and the committee [of unsecured creditors] not be hamstrung by an alleged secured creditor,” Doug Mannal, a lawyer for the committee said Tuesday. “We are doing our homework, but I think it’s important that we be given, and afforded the opportunity, time to the 29th to see if we can reach and make progress. We just need time.”