Bankruptcy Judge approves Fisker's USD 46.25 million Ocean EV liquidation deal

In a pivotal development for the defunct electric vehicle startup Fisker, a bankruptcy judge has granted approval for the company to liquidate more than 3,000 of its Ocean SUVs. The deal, struck with a vehicle leasing company, is set to generate a maximum of USD 46.25 million, translating to approximately USD14,000 per vehicle. This decision, announced late Tuesday afternoon, paves the way for the remainder of Fisker's bankruptcy process to unfold as the company continues to liquidate its assets.

The approval came after Fisker's legal team successfully addressed the primary objection raised by the Department of Justice's office of the U.S. Trustee. The Trustee's office had initially expressed concerns about the adequacy of Fisker's efforts to secure the best possible deal for its inventory and the valuation process for the vehicles. They also questioned the expedited nature of the deal.

John DiDonato, Fisker's chief restructuring officer, provided a detailed response to these concerns in a Tuesday morning filing. He revealed that Fisker had reached out to "hundreds" of potential buyers for the Ocean SUVs prior to its mid-June bankruptcy filing. These potential buyers included dealerships, rental car companies, taxicab operators, and ride-share leasing industry participants. However, the results of this extensive outreach were disappointing, with American Lease emerging as the only solid lead.

Judge Brendan L. Shannon, presiding over the case, concluded that DiDonato and Fisker had made sufficient efforts to secure the best possible bid. He described American Lease as "functionally a purple unicorn" due to their willingness not only to purchase the vehicles but also to address pending recalls, perform necessary work, and collaborate with the newly formed Fisker Owners Association to ensure the availability of spare parts and software support for existing owners.

The sale process will commence in the coming days, with Fisker set to transfer approximately 1,000 Ocean SUVs to American Lease, yielding around USD 14 million. An additional 500 vehicles are expected to be handed over next week, bringing in another $6 million. These funds will be crucial for maintaining operations, including paying remaining employees working on recalls, software updates, and facilitating ongoing vehicle sales.

However, the allocation of the remaining proceeds from the American Lease deal remains a point of contention. Heights Capital Management, Fisker's largest and only secured lender, has asserted its claim to these funds based on a 2023 agreement that pledged all of Fisker's assets as collateral following a breach of loan covenants.

The bankruptcy proceedings have taken a new turn with the revelation that Heights plans to file a motion to convert the current Chapter 11 bankruptcy to a Chapter 7 liquidation. This move has been described by Heights' lawyer, Scott Greissman, as "probably the most telegraphed chapter 7 conversion in history." The firm aims to liquidate Fisker's assets efficiently, avoiding the costs associated with a prolonged Chapter 11 process.

As the vehicle sales to American Lease commence, attention now shifts to upcoming hearings scheduled for July 22 and July 29. These sessions will likely focus on resolving the disputes surrounding asset claims and determining the future course of Fisker's bankruptcy proceedings.