Bankruptcy judge, creditors approve liquidation of Fisker assets

Rechargeable hybrid vehicles are gradually becoming more visible on roads in California and throughout the country, and most of the major car manufacturers have indicated their intention of competing in the luxury hybrid market. One of the first companies to enter that market was Anaheim-based Fisker Automotive.

Fisker encountered troubles, however, after the company's battery supplier filed for bankruptcy; the costs of a safety recall took their toll; and a shipment of vehicles was destroyed by Hurricane Sandy. Hybrid Tech Holdings eventually agreed to buy a government loan to Fisker for $25 million, and in 2013 Fisker filed for Chapter 11 bankruptcy. Around that same time, Hybrid planned to acquire Fisker.

In more recent developments, the Chinese company Wanxiang Group Corp. outbid Hybrid with an offer of $149.2 million for Fisker's assets. That figure is about six times higher than the initial bid. In February, a court approved the deal with Wanxiang, which already owns the successor to Fisker's former battery supplier.

The creditors in the bankruptcy case overwhelmingly approved of the Wanxiang deal, the proceeds from which will be distributed to Fisker's creditors. A bankruptcy judge in Delaware recently approved the plan for liquidation. The chief restructuring officer for Fisker referred to the plan as a "fully consensual resolution."

As the Fisker case illustrates, the life of a business can involve many cycles of growth and contraction, and owners of companies large and small have to be aware of the risks. Sometimes use of an exit strategy such as bankruptcy is the best option for resolving a debt problem. In any case, whether you are a creditor, debtor or trustee, there are legal avenues for achieving a favorable solution.

Source: Bloomberg Businessweek, "Fisker Liquidation Approved After Wanxiang Asset Sale," Dawn McCarty, July 28, 2014

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