Seven months after he filed for Chapter 11 bankruptcy to deal with a $ 3.6 billion personal debt, a judge approved the reorganization plan presented by Jia Yueting, the founding magnate of troubled startup EV Faraday Future.
In too simple terms, most of the many people and companies to whom he owes money, thanks in large part to the collapse of LeEco, the overly leveraged technology conglomerate with which he built his fortune in China, have agreed to switch their debt claims for pieces of Jia participation in the property of Faraday Future. Now they only have a chance to recover if the struggling startup successfully completes a public listing on a major stock exchange.
Founded in 2014, Faraday Future has spent more than $ 1.7 billion (about $ 900 million of which was from Jia) on its own and has yet to start manufacturing its first vehicle, a luxury SUV with displays known as the FF91. . Instead, the startup is most famous for the weaknesses linked to Jia's penchant for arrogance and poor financial management, both of which The edge have documented in recent years. And by its own admission, the company needs $ 850 million to start production of the FF91.
Jia repeatedly asserted in court that prolonged uncertainty about his personal debts would delay any possible financing of Faraday Future, although no evidence was ever given. And since the idea from the beginning has been to change the claims of the debt holders with participations in the beginning, he argued that they were interested in approving his plan as quickly as possible. In December last year, in fact, one of Jia's lawyers told the court that Faraday Future did not have the "financial means,quot; to do it for another 60 days, according to a transcript. "Faraday will basically run out of cash," the lawyer said at the time.
A former Faraday Future executive said The edge last year they felt this was "a weapon for the creditors' heads." Lawyers for some of the companies that Jia owes millions of dollars to present similar arguments in court that were ultimately unsuccessful.
However, Faraday Future has yet to run out of cash, thanks to a series of loans from a restructuring company that it has been working with since early 2019. Faraday Future also recently said that it received a $ 9 million loan as part of the government-related pandemic. "Payment Check Protection Program,quot;.
Jia's creditors were left with little choice but to accept his plan, because he doesn't have nearly enough personal wealth to fill the $ 3.6 billion hole he dug for himself. While Jia bought some multi-million dollar coastal mansions and land in Los Angeles before exiling himself to the US. USA In 2017 (to avoid further pressure from the Chinese government on his debts), he told the court that he got rid of the reality owned by that property. Even if that's true, its total value is only tens of millions of dollars.
Jia's bank accounts are also relatively empty, according to documentation she filed in court. In fact, he turned to cash-strapped Faraday Future to finance his bankruptcy in the first place. Jia borrowed $ 2.7 million from one of Faraday Future's holding companies to launch its bankruptcy in October last year, and has since taken another $ 6.4 million loan from that same entity to finance the process.
In a statement released Friday, Faraday Future says approval of the plan "has removed the biggest stumbling block in (the company's) equity financing efforts." Earlier this week, the company's new CEO (and former BMW executive), Carsten Breitfeld, said those funding efforts are "a little delayed,quot; due to the pandemic.