Fisker Faces Major Opposition to Its Fire Sale of the Ocean SUV

A significant opposition casts a shadow over Fisker’s prime opportunity to sell its stockpile of unsold electric vehicles, a move crucial for keeping the company’s bankruptcy process afloat and enabling reimbursement to its creditors.

This challenge is posed by the U.S. Trustee’s office, a Department of Justice division responsible for overseeing bankruptcy cases, aiming to enhance the bankruptcy system’s integrity and effectiveness for everyone involved.

However, Fisker is not without substantial backing for this transaction, which could potentially reach $46.25 million, transferring all North American configured Ocean SUVs to American Lease, a firm specializing in providing vehicles to ride-hail drivers in the New York City vicinity.

The matter is set for discussion on Tuesday morning in front of a judge at the Delaware Bankruptcy Court, who is expected to make a determination regarding the transaction’s approval.

Support for the sale within Fisker is widespread. Its largest secured creditor is pushing for the deal to proceed. The committee representing unsecured creditors, including stakeholders like Fisker’s manufacturing partner Magna, has also endorsed the sale. Additionally, the Fisker Owners Association has expressed its approval, given that American Lease, Fisker, and the primary lender agree to ensure the availability of spare parts and elucidate their plan concerning an ongoing recall related to the Ocean’s water pump issue.

Fisker emphasizes the urgency of the sale to create a financial safety net, vital for sustaining the bankruptcy process while creditors negotiate over remaining assets. The true worth of Fisker’s other assets remains uncertain, with claims of total assets ranging between $500 million to $1 billion, though the company has sought court permission to postpone releasing these details as they are still being tabulated.

Nevertheless, the Trustee’s office has voiced concerns in a filing to the Delaware Bankruptcy Court, highlighting issues with the sale’s structure as planned.

The objections raised by the Trustee’s office reflect skepticism about Fisker’s efforts in seeking alternative buyers, their promotion of the sale, and the valuation of the vehicles, criticizing the company for proposing to offload its fleet at significantly reduced prices without proper marketing to maximize return. Furthermore, they pointed out Fisker’s hasty attempt to finalize the sale, including scheduling an urgent hearing just before the Independence Day holiday.

Fisker, aiming for a swift sale hearing of their most valuable assets during a federal holiday period and eyeing a private sale to a sole buyer without exploring other potential bids, was challenged by the Trustee’s office.

During a prior emergency court session, Fisker’s Chief Restructuring Officer John DiDonato, alongside legal representatives, argued that a quick sale was essential for meeting payroll requirements and maintaining the bankruptcy process. Yet, after scrutiny from a Trustee’s attorney, a reevaluation of the startup’s limited assets led to a reduced urgency, prompting a salary decrease for founders Henrik Fisker and Geeta Gupta-Fisker to $1, and allowing for the possibility of delaying the sale to gather more feedback.

Further, the Trustee’s office is seeking clarifications on why American Lease’s initial offer on May 30 — pre-bankruptcy — for 2,000 Oceans at a higher average price, which would have benefited Fisker by approximately $40 million, later evolved.

Ideal Motors, a dealer partner Fisker collaborated with earlier, also contested the sale, highlighting a lack of suitable notification and remarking on the transaction’s unusually swift pace.

Despite introducing another prospective buyer during a July 9 hearing, the unsecured creditors’ committee now endorses the sale to American Lease, asserting that the Ocean SUVs were marketed effectively, insinuating that the proposed agreement represents the optimal and most beneficial offer for the assets in question, aimed at maximizing value for all stakeholders as per a recent filin.