💥New Chapter 11 Bankruptcy - Fisker Group Inc.💥
EV manufacturer on the brink of liquidation, Henrik Fisker's second failure.
On June 17, 2024, CA-based Fisker Group Inc. filed a bankruptcy petition in the District of Delaware.*
Like. That’s it. A petition.
Two days later we saw five more affiliates — including the publicly-traded entity, Fisker Inc. ($FSR)** — file petitions but it took until the morning of the first day hearing on June 21, 2024 to get a first day declaration.
We’ve covered this name previously:
You can review it. But look, the bottom line is that this thing just sucked. There really isn’t anything else to say. The company closed a SPAC transaction in October ‘20 and projected 51k units/year by ‘23. The actual number? 10.2k.
To put a finer point on it, the debtors’ operating revenue was $273mm in ‘23. Against net losses of $940mm.
Liquidity couldn’t keep up with the delays in production, nobody was interested in extending additional money, talks of a partnership with an OEM sputtered … yada yada yada … and we end up with chapter 11 cases that contemplate a liquidation of the debtors.
But the real interesting part of this story isn’t the production issues or the cars themselves — that sh*t has been covered, including by us, ad nauseum. What’s more interesting at this point is that, above it all, there’s some good ol’ fashioned yet two-bit lender on lender violence!
First, the cap structure:
![](https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F53f78968-d42d-4b5c-88b5-35d4cb56c534_654x95.png)
Both the ‘24 notes and the ‘25 convertible notes were issued to CVI Investments Inc., managed by Heights Capital Management Inc (“Heights”). What’s not shown on the above table is that both these notes are secured indebtedness. And if you go a little further down the rabbit hole, you’ll find that the ‘25 convertible notes were originally unsecured obligations until the governing docs were amended to secure a waiver of default back in the fall of ‘23.
You can imagine that a ‘26 convertible noteholder might just be slightly p*ssed at that transaction. And so an ad hoc group of ‘26 convertible noteholders (the “ad hoc group”) made an appearance during the first day hearing. Here’s Milbank LLP’s Alex Lees on behalf of that ad hoc group:
“It’s taken a very long time to get here - too long - because in the intermediate time, there’s been a lot of suspect activity by the debtors and their now secured creditor which has been highly detrimental to the unsecured creditors.”
Uh oh, whatever could Mr. Lees be referring to?
“The full story is that in the fall of last year, the company had a minor technical default on the convertible notes held by this entity called Heights. And that delayed it slightly in delivering its audited financial statements for the third quarter. That was the default. And this was not a delay measured in months, it was just a couple of weeks.”
“And then in the face of that technical default, just based solely on reporting, the debtors did something that we believe is pretty remarkable. They basically handed the whole business over to Heights.”
“And then since that transaction, Your Honor, we understand that Heights have basically come to dominate the debtors. Heights, as far as we know, has been deciding for the debtors which creditors to pay and in what amounts, and then handpicked the company’s chief restructuring officer who took control of the business, evidently for Heights’ benefits.”
Bring it on says White & Case LLP’s Scott Greissman on behalf of Heights:
“First, I don’t feel the need to respond to every one of the outrageous allegations that Mr. Lees just stated into the record and specifically without any real factual basis. And in fact designed as sound bites to get picked up by the media.”
Whoops, you caught us Scott!
But hold your horses guys, this is just a first day hearing and, more importantly, these cases are still on the precipice of converting to chapter 7. So what, exactly, are people even bothering to fight over?
Indeed, according to Davis Polk & Wardwell LLP’s Brian Resnick on behalf of the debtors:
“I will note that the debtors do not currently anticipate being able to obtain DIP financing for this case and the debtors have very limited cash at the moment.”
So how are we going to address the short term cash needs? Well luckily, Heights has agreed to allow for the use of cash collateral … for an entire week. This cash is intended to bridge to a sale of the debtors’ entire vehicle fleet configured for the US and Canada (~4.3k cars). There’s an agreement in principle with a purchaser. Per the debtors:
The Debtors and a vehicle leasing counterparty are in advanced discussions to execute a fleet sales agreement to provide for the purchase and sale of substantially all of the Company’s existing fleet of vehicles. The fleet sale, if executed and approved, would provide the Debtors with a substantial amount of cash proceeds.
The buyer? Here is The Wall Street Journal:
But until we get there — and subsequently an extended cash collateral order — this one’s a nail biter for sure.
The debtors are represented by Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Brenna Dolphin, Sophie Churchill, Evanthea Hammer) and Davis Polk & Wardwell LLP (Brian Resnick, James McClammy, Nicholas D’Angelo, Richard Steinberg, Darren Klein, Steven Szanzer) as legal counsel, and Huron Consulting Group (John DiDonato) as financial advisor. Heights Capital Management is represented by White & Case LLP (Scott Greissman, Elizabeth Feld, Viktor Braun, Ryan Beil, Nicholas Abbattista) and Klehr Harrison Harvey Branzburg LLP (Richard Beck, Alyssa Radovanovich) as legal counsel.
*The matter is before Judge Horan.
**Let’s pour one out for all the moms and pops who, once upon a time, reveled in the opportunity to get in on the great EV SPAC grift of ‘20. Who could have predicted that this thing could’ve failed? After all, one basis for startup funding is the founding team, especially one with a track record full of demonstrable prior success. You know, guys like Henrik Fisker. Oh, shoot. Nevermind. 🖕
Company Professionals:
Legal: Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Brenna Dolphin, Sophie Churchill, Evanthea Hammer) and Davis Polk & Wardwell LLP (Brian Resnick, James McClammy, Nicholas D’Angelo, Richard Steinberg, Darren Klein, Steven Szanzer)
Financial Advisor/CRO: Huron Consulting Group (John DiDonato)
Claims Agent: KCC (Now Verita: click here for free docket access)
Other Parties in Interest:
CVI Investments Inc (Heights Capital Management)
Legal: White & Case LLP (Scott Greissman, Elizabeth Feld, Viktor Braun, Ryan Beil, Nicholas Abbattista) and Klehr Harrison Harvey Branzburg LLP (Richard Beck, Alyssa Radovanovich)
JPMorgan Chase Bank NA
Legal: Blank Rome LLP (Regina Stango Kelbon, Stanley Tarr, Lawrence Thomas III, Jordan Williams)
‘26 Converts Indenture Trustee: US Bank NA
Legal: Faegre Drinker Biddle & Reath LLP (Laura Appleby, Richard Benard, Patrick Jackson, Brett Fallon)
Manufacturer: Magna International Inc.
Legal: Weil Gotshal & Manges LLP (Ray Schrock, Garrett Fail, David Cohen, Gavin Andres) and Richards Layton & Finger PA (Mark Collins, Zachary Shapiro, Matthew Milana)
Ad Hoc Group of Convertible Noteholders
Milbank LLP (Alex Lees)