WILMINGTON, Del. (AP) - A Delaware bankruptcy judge on Friday set a Feb. 12 auction date for Fisker Automotive, with two rival groups sharing initial bidding status for the remaining assets of the failed electric-vehicle maker.
Approval of the proposed bid procedures by U.S. Bankruptcy Judge Kevin Gross clears the way for an auction that will start with competing bids by Hybrid Technology, led by Hong Kong billionaire Richard Li, and Chinese auto parts conglomerate Wanxiang Group Corp.
It’s unclear whether other parties will join the bidding. Under the timeline approved by Gross, qualified bids are due Feb. 7, and a court hearing on whether to approve the auction results will be held Feb. 14.
Hybrid has offered $30 million in cash to go along with a credit bid of $25 million in debt that it would cancel as Fisker’s senior secured lender.
Wanxiang has offered $35.7 million in cash and a 20 percent equity stake for creditors in a reorganized Fisker. Wanxiang’s bid also allows for the possibility of creditors recovering more money through lawsuits against Fisker, Hybrid and other parties.
“We have two good bidders,” said William Baldiga, an attorney representing Fisker’s committee of unsecured creditors.
Under the bid procedures, the committee and Fisker will work together to select the winning bidder.
Hybrid had proposed that at least $5.5 million of the cash portion of its bid would go to Fisker’s unsecured creditors if they support its bid over Wanxiang’s. But with Hybrid and Wanxiang designated as joint “stalking horse” bidders, that provision is no longer on the table.
California-based Fisker, which had planned to build cars at a former General Motors plant in Delaware, filed for bankruptcy protection in November. The move ended a long, downward spiral that began after it received a $529 million loan commitment from the U.S. Department of Energy in 2010.
Delaware Gov. Jack Markell and Vice President Joe Biden, Delaware’s former senior U.S. senator, stood with Fisker officials at the former GM plant in Wilmington in 2009 to announce with great fanfare that Fisker would revive vehicle production there.
But the Obama administration suspended its green-energy loan in 2011 after Fisker failed to meet several production and sales milestones for its $100,000 Karma luxury sports car. The Karma’s problems included vehicle fires and recalls, problems with battery packs, the bankruptcy of Fisker’s primary battery supplier, and inventory losses from Superstorm Sandy, which destroyed hundreds of vehicles at a port in New Jersey.
Last year, Hybrid bought the outstanding $168 million balance of the DOE loan for $25 million, or 15 cents on the dollar. It then moved to take control of Fisker in a private sale with a $75 million credit bid, based on its $168 million secured claim.
But Wanxiang, which recently bought Fisker’s former battery supplier in a separate bankruptcy case, worked with Fisker’s creditors committee to submit a rival offer. Wanxiang’s offer was contingent on the court eliminating or capping Hybrid’s credit bid at $25 million, a third of what Hybrid had planned to use. Gross agreed to the proposal, capping Hybrid’s credit bid and ordering a competitive auction.
Hybrid is appealing the judge’s ruling, but Gross defended his decision at Friday’s hearing, and in a written opinion he issued shortly afterward.
“I don’t like what Hybrid has done here,” the judge said, adding that the private sale Hybrid contemplated would not meet the “good faith” criteria for winning court approval of a bankruptcy sale.
Gross also rejected Hybrid’s suggestion that his ruling capping its credit bid would set a precedent.
“Among my faults, arrogance is not one of them,” said the mild-mannered judge. “I think I’m right on this one. … I don’t see a basis for an appeal.”
In his written opinion, Gross said Hybrid’s rush to purchase Fisker in a quick private sale was “inconsistent with the notions of fairness in the bankruptcy process.”
“The Fisker failure has damaged too many people, companies and taxpayers to permit Hybrid to short-circuit the bankruptcy process,” he wrote.
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