July 25 (UPI) — More details about the bankruptcy of Jia Yueting, founder of electric-car start-up Faraday Future, have come to light as courts and creditors approve plans for the bankruptcy of Jaju Tingting, founder of electric-car start-up Faraday Future, including the company’s early efforts to attract more interest from investors and even close to reaching an investment agreement with the Middle East sovereign wealth fund.
Pictured: Jia Yueting, founder of electric car start-up Faraday Future.
Faraday should meet with representatives of a sovereign wealth fund in the Middle East at the end of 2019 to discuss an investment that could help the troubled electric car start-up emerge from its ongoing financial woes. But jia Yueting’s chapter 11 bankruptcy filing, according to transcripts, showed that the wealth fund withdrew its investment intentions shortly after he filed for personal bankruptcy to settle billions of dollars in personal debt.
“We were invited by a government entity to meet with representatives of a sovereign fund in the Middle East, but when we filed for bankruptcy, the company’s financial problems became apparent, farright’s future was not invited again,” Mr. Jia’s lawyer told the judge in December 2019.
Mr. Jia’s lawyer, speaking at the hearing, did not specify which Middle Eastern sovereign wealth fund was interested in its investments, and a spokesman for Faraday’s future declined to comment. The Saudi Public Investment Fund already owns a majority stake in Another electric car start-up, Lucid Motors, while the UAE and Kuwait’s sovereign funds are even larger. John Schilling, Faraday’s future communications director, declined to comment, saying: “This is confidential information about investor discussions.” “
But regardless of who the investors are, the Middle East’s interest in Faraday’s future is just one of many facts that have come to light during Jia’s bankruptcy. Mr Jia’s bankruptcy lasted seven months and was approved by a number of creditors and courts in May. Here are a few important details from its bankruptcy:
Mr. Jia told creditors that Faraday’s future had attracted a lot of interest.
Despite Faraday’s future troubles, including the poaching of a large number of talent by rivals, the company insists the patented technology developed for the FF91 electric SUV since 2014 is valuable. The company also said investors or partners would flock to the company once the financial issues and Jia Yueting’s bankruptcy were resolved. While Mr Jia’s bankruptcy did hamper the deal, he told creditors in April that Faraday’s future had finally piqued investor interest.
According to a statement, Mr. Jia’s legal team told creditors that Faraday was “in talks with several potential investors in the Middle East” and that the company was “working with more than 20 potential debt investors” to provide short-term financing and was even “working on a U.S. government loan.” His legal team also said Faraday’s future was “in talks with the governments of china’s three provincial capitals to establish a headquarters” and that the company was “in close communication with two major Chinese otodevice manufacturers on cooperation matters”.
It is not surprising that Faraday’s future is likely to attract more investor interest. It was reported late last year that the company had held talks with Fiat Chrysler Automobiles at one point. Electric car companies are again hot targets for investment deals of all sizes, such as Rivian’s continued capital raising and zero-emissions trucking company Nikola’s recent reverse merger with Fisker raising hundreds of millions of dollars. Many electric car companies are waiting in line for a listing, and even Karma Automotive has secured a $100m financing.
“I can say with certainty that as Faraday continues to move towards the delivery of FF91, we are in discussions with different organizations and the nature and extent of the discussions are confidential, so I cannot give any further details,” Schilling said.
2. Faraday’s future in Los Angeles will provide its new CEO with a multimillion-dollar home.
In September 2019, Mr. Jai stepped down as future chief executive of Faraday, replaced by Carsten Breitfeld, who embarked on a new path to orthodoxy. A former BMW executive, Mr. Brayfield has extensive connections in the industry and helped create another electric vehicle start-up, Batten. The company was almost close to production before the new Crown outbreak.
In an interview last year, Mr. Brayfield said he told Mr. Jia that he would only choose to join if he was appointed future chief executive of Faraday. But in exchange, Brayfield got more than just a title, because, according to the bankruptcy case, Brayfield now lives in a multimillion-dollar home owned by Jia Yingting’s partner.
However, it is not clear which house it is. Mr Jia’s lawyer said: “Part of The consideration of Mr Brayfield accepting the CEO position is that he will live in one of Marguerite Properties’ residences. He was referring to a multimillion-dollar waterfront mansion on Margarita Boulevard in Rancho Palos Verdes. Mr. Jia used the mansions to house Faraday’s future executives, host parties and act as collateral for loans when money is tight. But Mr. Brayfield recently posted a photo on Twitter of Mr. Deng Chaoying, Faraday’s future vice president, outside a $2 million mansion in the outback.
In an e-mail, Mr. Schilling said Mr. Bradfield lived in “a property leased by Faraday in the future, which was provided to executives as part of their relocation benefits.” Mr. Brayfield, who used to live in Silicon Valley and often traveled to Germany and China while working for Mr. Biden, said last year that he had moved to Los Angeles to facilitate his future job in Faraday.
He said: “I destroyed all the way back, left my home in Munich, left everything in the world, my son and I moved here, and now I live here. It’s much better than Silicon Valley. In Silicon Valley, if you like technology, you’ll meet a lot of technicians, which is very exciting. But from a life point of view, it’s just so boring. It is very close to the sea, I like the sea very much, the quality of life is much better. “
3. Faraday Future helped fund Jia Yueting’s bankruptcy.
Faraday’s future has been short of funds for much of its existence. But funds have been particularly tight since the company parted ways with china Evergrande, its main investor, in 2018. The split, which led to hundreds of layoffs and unpaid leave, turned out so bad that Faraday would sell its headquarters in 2019 to get some cash.
However, Mr Jia’s bankruptcy was financed by Pacific Technology, one of Faraday’s main holding companies. At the start of the process, he borrowed $2.7 million from Pacific Technologies, and by the end of the case earlier this year, he had borrowed $6.4 million from the company.
Mr. Jia’s lawyers initially said it was because Faraday Future offered the most lenient loan terms. In other words, as expected, other lenders want better protection or more returns when they lend to a person with billions of dollars in personal debt. But they eventually admitted that Jia Yueting had no way to go.
“Ultimately, Pacific Technologies is the only entity willing to raise money from debtors under Chapter 11 of the bankruptcy law,” they wrote. Mr. Jia’s lawyers claim that all this is true and that the creditor committee helped negotiate the terms. The money is not directly from Faraday’s near-exhausted coffers, but is made up of personal donations from members of Faraday’s future Global Partners executive management team.
Jia Yueting’s bankruptcy clarified the complex relationship between his companies. In the case of luxury homes, Mr. Jia initially bought them through a company called Ocean View Drive, and he even borrowed some money from Faraday Future. He said he no longer owns shares in the houses, but Ocean View Drive now rents the house to Jia Yueting, who will start subletting it to a company called Warm Time for $43,810 a month in 2019. In a filing with the California secretary of state, Warm Time used the home of Faraday’s future vice president, Deng Chaoying, as his corporate address and re-leased it to Faraday Future, offering a full range of services such as food, housekeeping, insurance and water and electricity.
4. Faraday will survive by borrowing money in the future and is still short of cash.
One of the main reasons Faraday has been able to survive for so long in the future is that in early 2019 it began working with “bankruptcy legend” Jack Butler, whose company, Birch Lake, has made multiple loans to the start-up and helped it find capital.
The downside is that most of Faraday’s future tangible and intangible assets have become collateral, according to Mr. Jia’s bankruptcy filing. This means that the start-up may find it harder to get new loans, and it risks losing those assets if it fails to repay the debt it has been saddled with. In fact, Faraday future had to apply to Birch Lake for a $45 million loan extension, which expires in October 2019.
Faraday Future recently said it had repaid the loan. Birch Lake has lifted control over Faraday’s future intellectual property, according to documents filed with the California Secretary of State and the U.S. Patent and Trademark Office. However, the interest on the company’s mortgage has been transferred to a California limited liability company called Royod. Mr. Schilling said it was a “current lender” but had little more information about the money behind it. The address given by Royod in a filing with the Patent Office is just a Santa Monica Post Office. Documents filed with the secretary of state show that the company is run by a man named Kai Dong, who appears to have been Faraday’s future administrative assistant.
By the end of July 2019, Faraday would have to continue borrowing money because the company had only $6.8 million in cash on its accounts (the latest figures shared in Jia Yueting’s bankruptcy filing), while the roughly $2 billion that Jia Yueting and Evergrande had invested in the past few years had run out. In December, a lawyer for Mr. Jia told the judge that he did not believe the start-up had enough “money” to stay in business for 60 days and that the company would “basically run out of cash”. Its Global Partners had to lend $16.5 million to Faraday Future in June 2019 to support its day-to-day operations. In April, the start-up also received a $9.1 million loan from the new Crown outbreak-related PPP program.
With The bankruptcy of Jia Yueting approved, Faraday Future says it can now once again attract investment in the name of eventually launching a luxury electric SUV. But even in a market where electric car start-ups suddenly get funding, Faraday has a long way to go. Mr Brayfield has said Faraday will need $850million in the future to start production. According to court documents, the start-up has recently been struggling to secure a $170 million loan to “maintain its operations and construction projects” following Jia’s bankruptcy.
If Faraday succeeds in raising new capital and putting it into production in the future, Mr Jia’s creditors will now benefit, as they agreed to swap their claims for shares in a trust that would pay them if the start-up went public or sold them when they approved his bankruptcy plan. In a letter published last month, Jia Yueting, a former salesman, sees many of his troubles as positive. “I firmly believe that past successes and failures will be valuable lessons learned from Faraday’s future successes,” he wrote. I’ve learned a lot from the mistakes of the past, and I hope I don’t repeat them. ” (Small)