Henrik Fisker Reduces His Salary to $1 in Effort to Sustain Fisker Inc.’s Solvency

Henrik Fisker and Geeta Gupta-Fisker, the husband-and-wife team behind Fisker Inc., have decided to reduce their salaries to $1 as a measure to ensure continued financial support for their struggling electric vehicle startup’s bankruptcy process, while legal efforts are underway to sell off the company’s remaining assets.

John DiDonato, who is handling Fisker Inc.’s restructuring, revealed on a Tuesday that the founders adjusted their compensation on July 8, merely days following a probing by Linda Richenderfer, an attorney for the U.S. Trustee’s office, on their financial remuneration amid the startup’s troubles since its 2016 inception.

Richenderfer’s July 3 inquiry focused on the Fiskers’ salaries and the exhaustive search for alternatives to keep the company afloat, especially as the legal team sought the court’s nod for an expedited asset sale — specifically the EV models tailored for the North American market — to finance the Chapter 11 proceedings and associated legal and wind-down costs.

DiDonato, initially uncertain about the exact remunerations, confirmed to Richenderfer that adjustments and potential deferments in the founders’ salaries were being considered.

Details prior to the firm’s descent into bankruptcy remain vague, though a regulatory filing acknowledged minimum-wage payments to both Henrik and Geeta in 2022, alongside lump-sum bonuses.

Adding to the salary cuts, DiDonato’s Tuesday filing noted that Fisker would also postpone certain severance pay, employee health benefits, and incentives yet to be distributed. From a workforce numbering approximately 1,300 in September 2023, the personnel count has diminished to about 130.

In a bid to raise funds, Fisker is in the process of finalizing a deal with American Lease, a New York firm predominantly servicing ride-hailing operators, to sell over 3,000 Ocean SUVs for a proposed $46.25 million. While Fisker agreed on this transaction, another prospective buyer under a non-disclosure agreement has shown interest, though details remain scant.

During the July 3 hearing, it was disclosed that Fisker planned to deliver Ocean models in batches of 200 to American Lease, particularly due to a water pump issue affecting the vehicle’s battery which is now subject to an official recall.

Thanks to outlined cost-saving strategies, vehicle auction revenues, and bank interest, Fisker is hopeful of sustaining its financial needs in the upcoming weeks. A final verdict on the American Lease deal is deferred to July 16, allowing additional time for evaluating all potential transactions.

Brian Resnick of Davis Polk, representing Fisker in the bankruptcy proceedings, underscored the flexibility this delay affords, including consideration for other potential deals, while remaining focused on the American Lease agreement.

The ongoing dispute involves Fisker’s main secured creditor, Heights Capital Management, and numerous unsecured lenders, with a committee recently speaking on their behalf, challenging Heights’ priority claim over Fisker’s assets.

Heights, which lent approximately $500 million to Fisker in 2023 under uncollateralized terms with options for stock conversion, found itself in a favorable position following a covenant breach by Fisker. The implications of this situation on Fisker were significant, as discussed during a recent hearing.

Accusations were made against Heights for profiting significantly from Fisker’s assets, leading to a debate on the rightful claims over the company’s remaining value, with unsecured creditors owed about $1 billion.

In defense, Heights’ representative, Scott Greissman, highlighted the legality of their actions within agreed contracts, cautioning against strategies that might further dilute Fisker’s asset value. Greissman portrayed the ongoing Chapter 11 filing primarily as a liquidation effort, underscoring the financial risk of even a successful sales agreement.