Last week, Fisker’s (OTCMKTS:FSRN) operating subsidiary, Fisker Group, announced that it had filed for Chapter 11 bankruptcy protection, sending FSRN stock plummeting lower.
The announcement wasn’t all too surprising, as it followed a going concern warning, a delisting from the New York Stock Exchange and the botched debut of the Ocean electric vehicle (EV) laden with software issues and user complaints. The company had also tried to partner with a legacy automaker rumored to be Nissan (OTCMKTS:NSANY), to no avail.
Fisker noted that it was in advanced discussions with its stakeholders involving asset sales and debtor-in-possession financing while its production would remain halted.
Last Friday, Fisker attorney Brian Resnick informed U.S. Bankruptcy Judge Thomas Horan that the company planned on liquidating all of its assets. Fisker has also reached a “tentative deal” with a single, undisclosed buyer for all of its 4,300 vehicles, according to Reuters.
Fisker Stock: Fisker Reaches ‘Tentative Deal’ to Sell 4,300 Vehicles
As is usual with bankruptcy proceedings, there’s also drama between the stakeholders. Fisker owes “over $850 million to two groups of bondholders,” with attorneys from the larger group accusing Heights Capital Management of unfairly taking control of the company’s debt last November.
“At the time, Fisker was late in providing audited financial statements due under its debt agreements, and Heights used that ‘minor, technical default’ to claim all of Fisker’s assets as collateral on its bonds, Alex Lees, an attorney for other bondholders, said,” wrote Reuters.
Lees believes that Fisker should have filed for bankruptcy in November and will challenge the agreement that provides Heights with payment priority. Meanwhile, Heights Capital attorney Scott Greissman has responded by claiming that Fisker’s sale of 4,300 vehicles would only cover a “fraction” of the firm’s $185 million in Fisker debt.
Additionally, Linda Richenderfer, an attorney for the U.S. Trustee Program — a U.S. Department of Justice bankruptcy watchdog — believes that Fisker’s bankruptcy will convert to Chapter 7 “once the vehicle fleet is sold.” This is attributed to the amount of power that Heights has over the company. Chapter 7 is considered a liquidation bankruptcy while Chapter 11 is considered a reorganization bankruptcy.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
