Creditors to Get Control of EV Startup Faraday after Founder Files for Bankruptcy

Jia Yueting, the Chinese businessman who set up electric vehicle startup, Faraday & Future Inc has filed for personal bankruptcy in the United States. He ended up in debt to the tune of several billions as part of his effort to set up a business empire in China.

Yueting plans to turn over Faraday &Future, which is based in Los Angeles to the company’s creditors as part of the plan to restructure his debts.

He filed the proposed debt-restructuring plan in federal court in Wilmington, Delaware and according to the plan, he will use his stake in Faraday & Future Inc. to set up a creditor trust that will repay his debts.

According to the plan, Jia’s debts total up to USD 2.3 billion and they were owed to creditors in China. The plan is also meant to help Faraday to raise equity financing and prepare for an IPO. Depending on the amount that the IPO raises, creditors might be able to recover about 49 percent to 100 percent of what they are owed, according to the documents that were filed in federal court.

Faraday is engaged in the design and development of an electric vehicle that will be available in the US and Chinese markets. In view of Jia’s financial woes, the company had hired Carsten Breitfeld, an ex-BMW automotive veteran, to take over as the CEO from Jia.
Earlier in 2019, Faraday had received a much needed infusion of funds when it formed a joint venture with The9 Ltd., a Chinese online-gaming company, which is a part of China Evergrande Group. The Evergrande Group is owned by property tycoon Hui Ka Yan, who is the third richest man in China. He initially agreed to invest USD 2 billion in Faraday but later reduced this amount to USD 800 million for a 32 percent stake in the company.

Jia has previously been in the news for making disparaging comments about other ventures. In a 2016 TV interview, he called Apple Inc. “outdated” and said he expected Faraday to “lead the industry leapfrogging to a new age.”