By on October 15, 2019

Faraday Future FF 91 rear

The founder of Faraday Future, Yueting Jia, has filed for bankruptcy and restructuring under Chapter 11 in the United States, according to a statement released by the company. The decision allows Jia (known within the company as “YT”) to address his debts in China, which can be measured billions, so his ownership of FF can be transferred to creditors.

Due to Faraday’s repeatedly broken promises and clandestine way of doing business, we’ve never had an overabundance of faith in the company. While that view hasn’t changed, the corporate statement frames Jia’s U.S. bankruptcy as a positive. 

Jia is looking at a little over $2 billion in debts after deducting the value of frozen assets in China and guarantees on some convertible loans. Without them, it’s closer to $3.6 billion. In addition to the bankruptcy filing, Faraday wants to establish a “creditor trust” for the benefit of YT’s creditors. Once established, it will be jointly managed by a committee of creditors and trustee providing oversight.

From there, Jia plans to transfer all his existing equity interest in Smart King Limited, the global holding company for Faraday Future, to the creditor trust to better protect his creditors and repay his debts. While FF issued a more complete outline of its plan, there was also a shortlist of the most pertinent issues:

  1. This Plan provides YT an opportunity to address his personal debts, help facilitate FF’s equity financing efforts and prepare for an IPO, and further advance the implementation of FF’s US-China dual home market strategy.

  2. YT will continue to be involved with the FF team to complete its strategic goals in the capacity of FF’s founder and Chief Product & User Officer (CPUO) and to maximize the value of FF and the assets in the creditor trust. The Plan benefits all stakeholders.

  3. This filing for restructuring will not affect the ownership of employee stock options or shares in FF acquired upon exercise of employee stock options. Employee stock options will remain an effective tool to help FF continuously assist in the recruitment of future talent.

Faraday says none of this will impact “normal business operations.” But that’s not saying much, considering the company’s stagnation over the last year. YT also has his debts split between over 100 different parties thanks to the total collapse of FF’s Chinese sister company LeEco ⁠— a company currently on the nation’s “debtor blacklist.” The restructuring aims to help settle outstanding debts and absolve Jia from all liabilities and outstanding claims.

In order for this plan to work, 90 percent of the organizations and individuals YT owes money to have to agree to the strategy by November 8th. It’s an all-or-nothing plan, with the fate of the company pretty much hanging in the balance. If everyone plays ball, Jia thinks he can repay any remaining debts and get the company back on track with an IPO. But that cannot happen with a bunch of Chinese debt mucking things up.

[Image: Faraday Future]

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