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 U.S. Bankruptcy Judge Kevin Gross in Wilmington began a hearing on
Tuesday by suggesting the company should slow down its plan to sell
its assets to Hong Kong tycoon Richard Li and give creditors four
more weeks to get a handle on the situation.
"I'm not sure why another few weeks relatively speaking would harm
this process," said Gross. "It would allow time for the creditors'
committee to continue and complete its investigations."
Fisker filed for bankruptcy on November 22 and a creditors'
committee was formed only on Thursday. The company has not produced
a car in almost 18 months and the judge said there was no business
that needed to be rescued through the breathing space of bankruptcy.
"This is not the case of a melting iceberg or a burning omelet or
anything of that nature," he said.
Attorneys for both Fisker and its creditors disagreed. Although they
discussed Gross's comments during a hastily arranged recess, no one
took up the judge's suggestion to slow the process.
"The creditors' committee does agree that this timeline is the right
timeline," Sunni Beville, a lawyer at Brown Rudnick who represents
the committee of unsecured creditors, said.
Gross gave his approval during the hearing to a provisional
disclosure statement explaining Fisker's repayment plan, which will
be sent to creditors to guide their vote.
Gross scheduled a hearing for January 3 at which he will decide if
the plan of reorganization should be approved by the court, and also
to approve the sale of the company's assets.
The assets are being sold to a company affiliated with Li. In
November, the U.S. government auctioned a $168.5 million loan that
it had made to Fisker, and Li's $25 million was the top bid.
Li is paying for Fisker's assets by "credit bidding," or applying
what is owed on the loan toward purchasing Fisker's assets. In
addition, Li's company is contributing $500,000 cash for unsecured
creditors, but only if they vote to accept the plan.
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Under the plan, former employees — who are owed more than $3.5
million — estimate that they and fellow unsecured creditors such as
suppliers will be repaid about one-quarter of one cent for every
dollar they are owed.
The company has taken an unusual step of skipping an auction of its
assets, arguing that it actively shopped them prior to bankruptcy
and that Li's proposal is the best out there. However, the company
did tell Gross that there is no break-up fee and no cost to the
estate if a better deal emerges.
An attorney for the U.S. Trustee, a government bankruptcy watchdog,
told Gross that in addition to banks and investors, creditors
include hundreds of consumers who stand to lose their deposits on
Fisker orders.
"Granted someone that puts down a deposit on a $100,000 car is
probably a more sophisticated consumer than someone who puts down
money on a Toyota Corolla," said Mark Kenney of the U.S. Trustee's
office. "Still, we need to make sure they understand the process."
Kenney also said creditors could be sorry if they agree to a rushed
process.
The case is In re Fisker Automotive Holdings Inc, U.S. Bankruptcy
Court, District of Delaware, No. 13-13087
(Reporting by Tom Hals in Wilmington,
Delaware; editing by Bob Burgdorfer)
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