Judge raises concerns about Fisker's race through bankruptcy
WILMINGTON (Reuters) - Fisker Automotive Holdings Inc might not be making its plug-in Karma sports cars anymore, but it still knows speed. The company's lawyers convinced a bankruptcy judge on Tuesday that its Chapter 11 should proceed at an unusually rapid pace.
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.
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)