In re Fisker Auto. Holdings, Inc.
| Decision Date | 17 January 2014 |
| Docket Number | Case No. 13–13087(KG) |
| Citation | 510 B.R. 55 |
| Parties | In re Fisker Automotive Holdings, Inc., et al., Debtors. |
| Court | U.S. Bankruptcy Court — District of Delaware |
OPINION TEXT STARTS HERE
Ryan Dahl, David L. Eaton, Gregory Francis Pesce, Anup Sathy, Nora S. Tauke Schweighart, Kirkland & Ellis, LLP, Chicago, IL, Daniel T. Donovan, Jeffrey Landis, Kate S. O'Scannlain, Kirkland & Ellis LLP, Washington, DC, Laura Davis Jones, Peter J. Keane, James E. O'Neill, Pachulski Stang Ziehl & Jones LLP, Wilmington, DE, James H.M. Sprayregen, Kirkland & Ellis LLP, New York, NY, for Debtors.
The Court's Memorandum Opinion will address the Debtors' Motion ... Authorizingthe Sale of Substantially All of the Debtors' Assets ... (the “Sale Motion”) (D.I. 13). Also before the Court is the Motion of the Creditors' Committee ... Approving Bid Procedures ... (the “Bidding Procedures Motion”) (D.I. 265).
The Debtors 1 were founded in 2007 with the goal of designing, assembling, and manufacturing premium plug-in hybrid electric vehicles in the United States. Debtors faced many difficulties that prevented the Debtors from operating as planned. The challenges included safety recalls related to battery packs supplied by a third party vendor, the loss of a material portion of their existing unsold vehicle inventory in the United States during Hurricane Sandy in 2012, and the loss of their lending facility provided through the United States Department of Energy (“DOE”).
1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Court may enter a final order consistent with Article III of the United States Constitution.
2. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The statutory bases for the relief requested are Sections 105, 363 and 265 of the Bankruptcy Code, and Bankruptcy Rules 2002, 6004 and 6006.
The following facts are uncontested and will describe the origination and essence of the conflict at hand.
1. The Debtors expressly filed these cases to accomplish the sale of substantially all their assets to Hybrid Tech Holdings, LLC (“Hybrid”) and then to administer these chapter 11 estates through the Debtors' proposed chapter 11 plan of liquidation.
2. As of the Petition Date, November 22, 2013, the Debtors had approximately $203.2 million in indebtedness and related obligations outstanding. As of the Petition Date, the obligations outstanding under these facilities, excluding accrued interest, were estimated at the following amounts:
$ millions
Senior Loan Agreement (DOE)
168.5
Silicon Valley Bank Working Capital Facility
6.6
Delaware Economic Development Agency
12.5
Related Party Notes
15.6
3. Debtors and the United States of America, through DOE, are parties to that certain Loan Arrangement and Reimbursement Agreement, dated as of April 22, 2010 (as amended, supplemented or otherwise modified, “Senior Loan Agreement”). Pursuant to the Senior Loan Agreement, DOE agreed to, among other things: (a) arrange for the Federal Financing Bank (“FFB”) to purchase notes from Fisker Automotive in an amount not to exceed $169.3 million to fund the development,commercial production, sale and marketing, and all related engineering integration of the Debtors' “Karma” model automobile, the Debtors' premium-priced PHEV (the “Karma Lending Facility”); and (b) arrange for FFB to purchase notes from Fisker Automotive in an amount not to exceed $359.4 million to fund the development, commercial production, sale and marketing of the Debtors' “Nina” model automobile, a moderately priced version of the Karma, including the establishment and construction of an assembly and production site in the United States (the “Nina Lending Facility,” and together with the Karma Lending Facility, the “Senior Loan Facility”).
4. On October 11, 2013, Hybrid purchased DOE's position of outstanding principal of $168.5 million ($.15/$1.00) under the Senior Loan Facility for $25 million and, for all practicable purposes, succeeded to DOE's position as the Debtors' senior secured lender.
5. With the Senior Loan sale by DOE to Hybrid, the Debtors entered into discussions with Hybrid regarding Hybrid's potential acquisition of the Debtors' assets through a credit bid of all or part of the Senior Loan. These discussions led to the Asset Purchase Agreement, pursuant to which Hybrid proposes to acquire substantially all of the assets of Debtors for consideration which includes $75 million in the form of a credit bid. The Debtors determined that a sale to a third party other than Hybrid was not reasonably likely to generate greater value than the Debtors' proposed sale transaction or advisable under the facts and circumstances of these chapter 11 cases. The DOE Loan purchase made Hybrid the Debtors' senior secured lender holding approximately $168.5 million in claims. What collateral is thereby secured remains at issue.
6. The Debtors decided that the cost and delay arising from a competitive auction process or pursuing a potential transaction with an entity other than Hybrid would be reasonably unlikely to increase value for the estates. The Sale Motion therefore reflects Debtors' decision to sell its assets to Hybrid through a private sale.
7. The Official Committee of Unsecured Creditors (the “Committee”) opposes the Sale Motion and is seeking an auction along the lines contained in the Bidding Procedures Motion. In particular, the Committee opposes Hybrid's right to credit bid. The Committee has proposed an alternative to the Hybrid private sale: an auction with Wanxiang America Corporation (“Wanxiang”).
8. While the offers are evolving and improving, the Wanxiang proposal at the time the Sale Motion was pending was extremely attractive both economically and in its significant non-economic terms. The Committee strongly endorsed Wanxiang's participation in an auction.
9. At the hearing on January 10, 2014, at which the Court was to consider the Sale Motion and the Bidding Procedures Motion, the Debtors and the Committee announced on the record an agreement to limit the areas of dispute. The Debtors and the Committee agreed that (emphasis supplied):
Stipulated Agreements
First, the Debtors and the Committee agree that, based on all the events that have transpired since the commencement of these cases, and especially the recent bid by Wanxiang, it now does appear to both parties that if Hybrid's ability to credit bid is limited as the Committee has asked, specifically that if at any auction Hybrid either would have no right to credit bid or its credit bidding were capped at $25 million, there is a strong likelihood that there would be an auction that has a material chance of creating material value for the estate over and above the present Hybrid bid. That auction would, of course, be open to all qualified bidders, and certainly to include Hybrid and Wanxiang and possibly others.
Second, if Hybrid's ability to credit bid is not capped, it appears to both the Debtors and the Committee that there is no realistic possibility of an auction, as we have no reason to believe that Wanxiang or anyone else would bid more than the amount of Hybrid's asserted secured claims.
Third, we agree that limiting of Hybrid's ability to credit bid, for these reasons alone, would likely foster and facilitate a competitive bidding environment, as those words were used by the Third Circuit in Philadelphia Newspapers, and that such a competitive bidding environment would likely result in material benefit to the estate.
Fourth, all of the work here has shown to both the Debtors and the Committee that the highest and best value for the estate is achieved only in the sale of all of the Fisker assets as an entirety.
Fifth, based on all the work that has been done by all parties and a constructive and collaborative exchange of views and information as appropriate in Chapter 11, we each also believe that within that entirety of the assets offered for sale are (i) material assets that we believe consist of properly perfected Hybrid collateral, (ii) material assets that are not subject to properly perfected liens in favor of Hybrid and (iii) material assets where there is a dispute as to whether Hybrid has a properly perfected lien, which dispute is not likely subject to quick or easy resolution. We may not agree on exactly where those lines are drawn between those three groups in certain respects. And we may not agree as to the allocation of value between these groups in all respects. But we agree that there are material assets in each category.
* * *
As our eighth agreement, the Committee agrees that if, based on these agreements and such other evidence and argument by all parties at today's hearing consistent in respects with these agreements, the Court rules that there is no basis to limit Hybrid's ability to credit bid as proposed, the Committee will withdraw all of its oppositions to the Debtors' present sale, DIP loan, plan and related motions as they are currently proposed, conditioned of course on Hybrid confirming its most recent proposal still stands and is not conditioned in any respect on plan acceptance or other such formality.
Finally, Judge, as to our ninth and final agreement ...
Based upon the agreements reached, the Debtors and the Committee ask the Court to rule on whether Hybrid's ability to credit bid should be limited exclusively based on the Committee's positions that: (i) credit bidding should not be permitted here given that a material portion of the assets to be sold in their entirety are not subject to a property perfected lien in favor of Hybrid or are subject to lien in favor of Hybrid which is in bona fide dispute,...
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