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U.S. seizes $21M from Fisker

by Jamie Mason  |  Published April 24, 2013 at 9:50 AM
The U.S. Department of Energy said it seized $21 million from troubled electric car company Fisker Automotive Inc. just days before the company's executives are set to testify Wednesday, April 24, in front of a U.S. House of Representatives subcommittee.

At 2 p.m. Wednesday, executives of the Anaheim, Calif.-based company, which makes the Fisker Karma luxury electric car, and the Department of Energy's supervisory senior investment officer Nicholas Whitcombe will testify in front of the U.S. House of Representatives subcommittee of the Oversight and Government Reform Committee led by chairman Jim Jordan, a republican U.S. Representative for Ohio's 4th congressional district.

The hearing is titled "Green Energy Oversight: Examining the Department of Energy's Bad Bet on Fisker Automotive" and will examine taxpayer support offered to Fisker, including the $529 million loan Fisker received from the U.S. Department of Energy.

Fisker executives Henrik Fisker, the company's former chairman and founder; Tony Posawatz, its CEO; and Bernhard Koehler, its chief operating officer; are witnesses for the testimony Wednesday.

"On April 11, the Department recouped the company's approximately $21 million reserve account--funds that came from the company's sales and investors, not our loan--and will apply those funds to the loan," DOE representative Aoife McCarthy said.

"Given the obvious difficulties the company is facing, we are taking strong and appropriate action on behalf of [U.S.] taxpayers. Using the safeguards we write into our loan agreements, the Department stopped disbursing on the loan in June 2011 after the company fell short of the aggressive milestones that we had established as a condition of the loan. As a result, while our original loan commitment was for $529 million, only $192 million was actually disbursed," McCarthy said in an e-mailed statement.

According to exclusive information provided by Sam Hamadeh, founder and CEO at PrivCo LLC, which provides financial data on privately held companies, "Fisker 'missed' its first interest payment [on April 22] in purely layman's terms in that [the company] did not have sufficient cash left in their own unrestricted cash bank accounts to make the $20.2 million first loan payment."

However, "with DOE knowledge and tacit approval, Fisker requested a withdrawal of $20.2 million from its restricted cash reserve account held at the Federal Financing Bank as a 'blocked' account as secured collateral ... for the protection of U.S. taxpayers," Hamadeh said. "Then [Fisker] used that withdrawal to make the loan payment, though in this case the $20.2 million was wired directly to the DOE Energy Vehicle Loan Fund as a timely payment by Fisker of its first $20.2 million loan repayment," Hamadeh said.

According to Hamadeh, these actions will give Fisker three more months before its next scheduled loan payment is due to the Department of Energy on July 22, and allowed the company to avoid a default, foreclosure or a Chapter 11 bankruptcy filing before the Congressional hearing Wednesday where witnesses will give sworn testimony regarding whether the Fisker loan is in default or the company has made its scheduled payments.

Hamadeh noted that Fisker has defaulted on numerous loan terms since at least June 2011.

Fisker's troubles began last year when the company lost access to part of the U.S. government loan -- which was to be used to fund production of its $50,000 Atlantic sedan -- due to the company's failure to meet production and sales milestones.

In September, the company said it had borrowed $192 million under the Department of Energy Advanced Technology Vehicle Manufacturing loan program.

Fisker spokesman Tony Knight refused to comment. Calls to Posawatz and the company's CFO Jim Yost were not returned Tuesday.

An automotive source reached Tuesday expressed surprise that the company has not yet filed for bankruptcy, speculating that Fisker's fate is tied to politics. The U.S. government, via its status as Fisker's primary secured creditor, would be in position to call the shots should the company file Chapter 11 and could be reluctant to shepherd a sale of the company's assets to a Chinese automaker.

Fisker's suitors to date have primarily been Chinese companies, but those firms balked at requirements under the Department of Energy loan program that the automaker manufacture vehicles in the U.S. The source said that there has been some talk of the Department of Energy softening or removing that mandate in hopes of facilitating new investment and avoiding a filing, though others in the industry downplayed that speculation.

Fisker has been exploring its strategic alternatives over the past several months, hunting for a buyer or an investment in its company. Fisker slashed its roughly 200-person workforce by roughly 75% in early April.

Fisker has been working with J. Stephen Worth, a senior managing director at Evercore Partners Inc., since December. Worth couldn't be reached for comment Tuesday.

The company also hired Kirkland & Ellis LLP to advise it on a restructuring, but the law firm refused to comment.

Fisker Automotive, which was founded in 2007, has raised more than $1.2 billion in debt and venture financing from investors including Kleiner Perkins Caufield & Byers, New Enterprise Associates and Palo Alto Investors LLC, as well as high-net-worth individuals.

Last month, the company lost a few interested buyers. Chinese automaker Dongfeng Motor Corp. reportedly backed away from negotiations, just days after Zhejiang Geely Holding Group Co. Ltd. walked away from the bidding.

Fisker's troubles worsened when the company hit another road block in October when its battery supplier, A123 Systems Inc., filed for bankruptcy. Worse still, Fisker said it lost more than 300 cars that were destroyed by Hurricane Sandy in late October.

Then, on March 13, the company's founder and executive chairman, Henrik Fisker, resigned from the company, citing disagreements with management over strategy.

-- Lou Whiteman contributed
to this report.
Tags: Dongfeng Motor | Fisker Automotive | Fisker Karma | Henrik Fisker | Jim Jordan | Nicholas Whitcombe | Tony Posawatz | U.S. Department of Energy | U.S. House of Representatives | Zhejiang Geely Holding Group

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