Faraday Future Founder Files for Chapter 11

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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4 of 6 comments
  • Lynchenstein @EBFlex - All ICEs are zero-emission until you start them up. Except my mom's old 95 Accord, that used to emit oil onto the ground quite a lot.
  • Charles The UAW makes me the opposite of patriotic
  • El scotto Wranglers are like good work boots, you can't make them any better. Rugged four wheel drive vehicles which ironically make great urban vehicles. Wagoneers were like handbags desired by affluent women. They've gone out of vogue. I can a Belgian company selling Jeep and Ram Trucks to a Chinese company.
  • El scotto So now would be a good time to buy an EV as a commuter car?
  • ToolGuy $1 billion / 333.3 million = $3 per U.S. person ¶ And what do I get for my 3 bucks -- cleaner air and lower fuel prices? I might be ok with this 🙂🙂