Fisker has been facing “potential financial distress” since last August, according to a new filing in Chapter 11 bankruptcy proceedings the EV startup filed earlier this week.
The admission provides a clearer picture of Fisker’s problems in 2023 as it struggled to ramp up deliveries of its flagship Ocean SUV, despite CEO Henrik Fisker’s assurances to the public at the time. In August 2023, even as Fisker’s financial health began to wane, the company held a “Product Vision Day” event to promote several new models under development, including a low-cost EV and an electric truck.
“Fischer does not stand still,” said Henrik Fischer he said then. “We want the world to know that we have big plans and plan to move into many different segments, redefining each one with our unique blend of design, innovation and sustainability.”
That looming financial distress has prompted Fisker to seek a partnership or investment from another automaker, according to the filing, which was written by the startup’s designated chief restructuring officer. Talks with this automaker, which Reuters first mentionted to be Nissan, which dragged on for months before collapsing earlier this year, putting Fisker in a “precarious position,” according to the filing. Fisker finally stopped production of the Ocean earlier this year, went through multiple rounds of layoffs, and is now beginning bankruptcy proceedings.
The Chapter 11 proceedings are intended to give Fisker some “breathing room” to “stabilize the business while pursuing an orderly and efficient liquidation of assets.” With so many creditors and debts, it’s unclear whether the company will function in any meaningful way when those assets are gone.
One of the most immediate issues to be resolved in the case is what happens to the remaining Fisker Oceans that remain unsold. Brian Resnick, a Davis Polk attorney representing Fisker in the Chapter 11 case, said at a hearing Friday that the company has reached an “agreement in principle” to sell the 4,300 unsold Oceans to an unnamed vehicle leasing company.
“We are in the position of needing to seek approval of this sale in the short term,” Resnick said, though he noted that lawyers working on Fisker’s behalf have yet to submit a formal proposal to execute any such sale.
The proceeds from this or any other sales of Fisker’s assets will likely go directly to Fisker’s largest (and only) secured creditor, Heights Capital Management, a subsidiary of financial services giant Susquehanna International Group.
Heights loaned more than $500 million to Fisker in 2023, with an option to convert that debt into company stock. Fisker was late in filing its third-quarter financial report with the SEC, which violated an agreement of that agreement with Heights. To remedy this breach, Fisker granted Heights a “first priority security interest in all existing and future assets.” Further breaches in the coming months put Heights in the driver’s seat for Fisker’s financial situation.
And yet, Fisker says in its Chapter 11 filings that it still owes Heights more than $183 million in capital payments to Heights.
Fisker has other assets beyond the Ocean SUVs that it can sell in the Chapter 11 process, including the equipment that the Magna manufacturer used to build the vehicles. There are 180 assembly robots, an entire underbody line, a paint shop and other tools. Fisker has yet to offer a specific accounting of those assets or their value, saying only that its total assets range between $500 billion and $1 billion. Some of them are “specialised”, meaning it could be difficult to find a buyer who sees value in them.
Fisker also says in one of the filings that the low-cost Pear EV was in “advanced development” and that the Alaska truck was in “final development.” It is unclear at this time what, if any, value these vehicle designs have. Prior to its bankruptcy filing, Fisker was sued by Bertrandt AG, the engineering firm it hired to co-develop both of these vehicles. That company is now one of Fisker’s largest unsecured creditors in the bankruptcy case.
Alex Lees, an attorney representing another group of unsecured creditors to whom Fisker owes more than $600 million, raised concerns during the hearing that it took “too long” for Fisker to file for bankruptcy. He called Fisker’s relationship with Heights a “one-sided transaction” and a “terrible deal [Fisker] and his creditors”. Scott Greissman, an attorney representing Heights’ investment arm, said Lees’ comments were “completely inappropriate, completely unfounded.
The filings to date offer the most sobering look at Fisker’s diminished state. The company claims to have cut 400 employees worldwide, with about 181 remaining in the US, 70 in Germany, 23 in Austria and 57 in India. This represents a 75% decline from the company’s peak.
Fisker also has about $4 million in its various bank accounts, according to else archiving. He has about another $6 million in restricted cash. Fisker plans to sell nearly $400,000 worth of shares it owns in European charging network Allego to help offset the costs of continuing parts of the business, according to budget filed on Friday. It expects to spend about $1.7 million over the next two weeks on payroll and employee benefits. It does not currently budget for IT/Software, after-sales services or vehicle acquisitions.
