Henrik Fisker and his wife Geeta Gupta-Fisker, co-founders of Fisker Inc., are lowering their salaries to $1 to keep their failed electric vehicle (EV) startup’s bankruptcy proceedings funded while lawyers work to finish a sale of its leftover inventory.
John DiDonato, Fisker Inc.’s restructuring officer, said in a filing Tuesday morning that the couple, who co-founded the company in 2016, made the choice on July 8. This was only five days after Linda Richenderfer, a lawyer for the U.S. Trustee’s office, questioned him about the matter.
That meeting on July 3 was when Richenderfer asked DiDonato if the Fiskers were still getting paid. In order to pay for the rest of the Chapter 11 case, Richenderfer wanted to make sure that all other options had been explored. This was because the company’s lawyers were asking the court to allow a quick sale of Fisker’s electric vehicles (at least the ones made for North America). The money is meant to pay for court fees and the closing down of the business.
When DiDonato tried to remember how much Henrik and Geeta were being paid at the moment, he stumbled and told Richenderfer that their pay was “undergoing a modification” and possibly “some deferrals.”
It’s still not clear how much the couple was getting paid every two weeks while the business went bankrupt. In a report to the government last year, the company said that it gave them the California minimum wage in 2022, which was $62,400. But they were each given extra cash bonuses of $710,000.
In the filing on Tuesday, DiDonato also said that Fisker will delay “certain severance payments, certain employee healthcare benefits, and vehicle sale incentive bonuses” that have not yet been paid. The number of people working for Fisker has dropped from about 1,300 in September 2023 to about 130 now.
The company is trying to sell more than 3,000 of its remaining Ocean SUVs to American Lease, a business based in the New York area that mostly works with ride-hailing drivers. The deal is expected to bring in about $46.25 million. While Fisker is set on selling to American Lease, the startup has been contacted by another possible buyer. However, the details of this unknown buyer are secret, so it’s not clear what they want or how much they’d be ready to pay.
At the meeting on July 3, Fisker’s lawyer said that the plan was to give American Lease about 200 Oceans at a time. This was because of a problem with the EV’s water pump that can make the high-voltage battery lose power. The National Highway Traffic Safety Administration has ordered Fisker to fix that problem on all of their cars before they can be sold.
Fisker now thinks it can pay for the case over the next few weeks thanks to the cost-cutting ideas DiDonato suggested as well as extra money from previous car sales and interest on bank accounts. Now, July 16 is when the final choice on whether to go through with the sale to American Lease will be made.
“I think setting the hearing for that date gives everyone a little more breathing room and for other things that might happen,” Fisker’s lawyer, Brian Resnick of Davis Polk, said in a hearing Tuesday morning. Resnick said that includes the possible new buyer for Fisker’s assets. But he also said, “We’re certainly not taking our eye off the ball” when it comes to the American Lease deal.
The fight between Fisker’s only protected creditor, Heights Capital Management, which is part of the financial services company Susquehanna International Group, and its many unsecured lenders is still going on. Last week, a committee of unsecured creditors was finally set up, and at Tuesday’s meeting, their lawyers had their first chance to speak.
Doug Mannal, a lawyer at Morrison Foerster LLP, didn’t waste any time. The first Chapter 11 hearing was on June 21, when a lawyer representing an unsecured creditor spoke. During the roughly 30-minute meeting, he built on the claims, frustrations, and accusations made by that lawyer. Mannal’s speech was meant to send a message to the court: the committee of unpaid creditors doesn’t like how Heights ended up getting all of Fisker’s assets first.
In 2023, Heights gave Fisker loans worth about $500 million. There was no collateral to back up that loan, but it could be turned into Fisker stock. If Fisker didn’t file its third-quarter financial reports on time in late 2023, it broke one of the terms of the deal with Heights.
For some reason, and it’s still not clear what happened, Fisker made things right with Heights by pledging all of its assets as security for the rest of the debt. “What would be a pretty harmless event in most other situations has had a huge effect” on Fisker, Mannal said at the hearing. He also said that Heights was able to sell Fisker stock at a huge profit because the promise was broken. By selling the stock on the open market, Heights was able to turn $1 into $1.60.
It was said by Mannal that Heights was using Fisker as a “money tree” and that they had already paid back a lot more than the loans were worth. So, he asked why Heights was still saying that Fisker owed them more than $180 million, a debt that was still backed by all of Fisker’s assets, when all of the other creditors were owed about $1 billion.
Heights is being defended by Scott Greissman, a partner at White & Case LLP. He said that the company “has at all times acted within the four corners of a series of contracts” with Fisker. He told the court that Fisker was a publicly traded company with a board of directors and “fine counsel” who were in charge of negotiating the loans and the deal to fix the breach.
“Your Honor, similar to the first day hearingâdifferent law firm, same allegationsâwe don’t think it’s appropriate at all to respond to any of these allegations that Mr. Mannal has made about himself in a way that is almost like testimony,” Greissman said. “The way the [unsecured creditors’] committee is handling the case worries us a lot that it will hurt value instead of help it.”
âEnhanceâ the value of what’s left at Fisker is already being done by the group of unsecured creditors, which found the new possible buyer.
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No matter what happens in the next few weeks, Greissman made it clear that even though Fisker filed for Chapter 11, Heights only sees this as a sale. “Every dollar spent can’t be got back,” he said. “Even an approved sale won’t always be enough to keep a Chapter 11 case going, especially if it’s a very contentious one.”
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