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Faraday Future founder files for Chapter 11 bankruptcy

Faraday Futures founder and former CEO Jia Yueting has filed for Chapter 11 bankruptcy in Delaware court in an attempt to settle countless debts in China. The Chinese tycoon claims it still owes around $ 3.6 billion to more than 100 creditors, largely thanks to the collapse of LeEco, the technology conglomerate he founded there. The bankruptcy filing marks a major twist in the history of Jia's lush history of taking on debt, which led to his being named to a national debtor blacklist in China and provoking his move to the United States in 2017.

Before moving on In the court of Chapter 11, however, Jia offers to settle the debt through a trust supported by the value of his stake in Faraday Future. This trust will only pay to creditors if and when the startup becomes public. (This is similar to, but separate from, the Faraday Future plan laid out earlier this year for money-owning vendors, which was put together by Birch Lake Associates, a Chicago-based restructuring firm.)

Jia needs 90 percent of the people or companies he owes money to approve this transition plan by November 8. By signing the plan, however, these creditors also agree to release Jia (and his wife) for all personal responsibility and release existing claims against him.

At the same time, Jia is asking creditors to vote on Chapter 1

1 bankruptcy as a backup plan. This path to recovery will happen in much the same way – with Jia taking advantage of his stake in the company to eventually pay off the debt after an IPO – but with more involvement and supervision from the court, which he warns could pull the process out and eventually cost more.

Any delay could jeopardize the entire plan, Jia claims in the filings. As he and his lawyers put it, Jia and the creditors must come to a quick deal. Otherwise, Faraday Future will not be able to raise money while his Chinese debt is in the balance. If Faraday Future is unable to raise money, the value of its stake will decline, which in turn means that creditors are even less likely to become whole. Faraday Future, which can't raise money, also means the company "may be forced to liquidate its remaining assets and / or initiate bankruptcy proceedings" on its own, Jia admits.

If none of the plans are approved, Jia warns that he may have to declare Chapter 7 bankruptcy and completely liquidate all of his assets, which he says will lead to smaller payments to creditors, and also affect Faraday Future's ability to continue. There is also a clear warning in the submissions that there can be "no guarantee of the value of" Faraday Future "at this time or in the future," and that "there is no expectation that a market for [his equity] will develop. . ”

Some of Jia's other personal assets – including the mansions he owns through a California coastal shell company – are not used to support the trust, as they are temporarily frozen due to a number of ongoing litigation.

also a window into Faraday Future's economy for the past year and a half.While the troubled start of EV began 2018 with a $ 800 million injection from Chinese real estate conglomerate Evergrande, it finally posted a $ 477 million loss for 2018. Through 31. On July 2019, Faraday Future lost another $ 103 million and owed $ 159 million in accounts payable, with the company's total liabilities up to $ 801 million ollar July 31, and it had only $ 6.8 million in the bank. Faraday Future has lost $ 2.15 billion since its founding.

Faraday Future has partnered with Birch Lake, the restructuring firm, since March 2019. Birch Lake lent $ 15 million to Faraday Future in April to help keep the lights on, and the startup repaid that loan in September, according to bankruptcy filings. Another $ 45 million loan matures at the end of October, for which the company has already requested an extension, according to the filings. It is not immediately clear how the first loan was repaid, but Faraday Future recently sold the land it owned in Las Vegas, where it once planned to build a $ 1 billion plant.

Jia resigned to run Faraday Future in September. He was replaced by former BMW CEO Carsten Breitfeld, who confirmed that the company is still trying to get its luxury electric SUV (FF91) in production by the end of 2020. The company spent the past year in a cash crisis that resulted in hundreds of layoffs and the departure of key executives , including Jia's only remaining co-founder.

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