Fisker, an electric vehicle manufacturer, is currently navigating bankruptcy and has proposed selling its inventory of all-electric Ocean SUVs at a substantial discount.
The company has requested approval from the Delaware Bankruptcy Court to sell 3,231 finished vehicles to American Lease, a New York-based vehicle leasing company, for a total of $46.25 million. This price averages to approximately $14,000 per vehicle, significantly lower than the original starting price of around $70,000.
This sale is a key moment in Fisker’s Chapter 11 bankruptcy proceedings. The drastic reduction in price reflects Fisker’s urgent need to raise funds as it navigates through financial difficulties. Previously, the company had offered these vehicles at even lower prices just as it was sliding into bankruptcy.
Who Is Buying the SUVs?
American Lease, the prospective buyer, leases vehicles to drivers in New York City’s ride-hailing services, which will need to switch to zero-emission vehicles by 2030.
On May 30, two weeks before Fisker filed for bankruptcy, American Lease agreed to buy 2,100 of these SUVs. Later, on June 30, they decided to buy all 3,231 vehicles ready for sale in North America (this doesn’t include vehicles meant for Canada).
The deal states that American Lease can’t resell these vehicles for a year and mentions different prices for vehicles depending on their condition:
- $16,500 for vehicles in good working order.
- $3,200 for previously titled vehicles.
- $2,500 for damaged vehicles.
Fisker is Rushing the Sale
Fisker’s legal team is pressing for quick approval of this sale. They argue that without the money from this deal, the company won’t be able to pay for essential activities needed to close down the company smoothly.
At an urgent court meeting, Fisker’s lawyers said they need to sell the first 200 vehicles by July 12 to raise $2.8 million for urgent needs like paying their employees. However, they must first fix a newly found issue with the water pumps in these vehicles, a task assigned to some of Fisker’s remaining 179 employees.
What Are the Legal Challenges?
The situation is complicated by the concerns of those Fisker owes money to, particularly the unsecured creditors, who are owed about $1 billion and worry they won’t see any money from the vehicle sales.
Meanwhile, a major lender, Heights Capital Management, which loaned Fisker over $500 million and is still owed nearly $190 million, supports the sale. This is in part because last year, Fisker promised all its assets as security for the unpaid debt after a delay in financial reporting breached their lending agreement.
Representatives for the unsecured creditors and a U.S. Trustee’s office lawyer have expressed concerns about how quickly Fisker is trying to push through the sale. They fear this could lead to a Chapter 7 liquidation, where creditors might end up with even less.
Another court hearing is set for July 11 to look more closely at the sale’s implications and whether it should go ahead. If approved, Fisker will sell the vehicles “as is,” with no obligation to fix or update them beyond the current software version.
Featured Image courtesy of Allen J. Schaben/Los Angeles Times