Faraday Future’s Jia Yueting files for bankruptcy in US, to return to China

2 min read
<em>Jia Yueting, founder of electric vehicle startup Faraday Future and Chinese internet company LeEco. (Image credit: LeEco)</em>
Jia Yueting, founder of electric vehicle startup Faraday Future and Chinese internet company LeEco. (Image credit: LeEco)

Faraday Future founder Jia Yueting has filed for bankruptcy in a US federal court with plans to hand control of the company to his lenders, the firm said on Monday, marking what may be a turning point for the troubled electric vehicle maker.

Why it matters: Faraday Future, or FF, will be no longer liable for Jia’s liabilities upon completion of the individual debt restructuring, which may help the cash-starved company seek new investors to fund mass production of its first model FF91 by its self-imposed September 2020 deadline.

  • The restructuring allows for Jia to return to China and rebuild his reputation, which may help the would-be automaker reach its goals and “brings great impetus to FF’s capital raising efforts and planned future IPO,” according to a statement released Monday.

Detail: Jia filed for Chapter 11 on Sunday with a plan to swap his debts for all of his equity in the Los Angeles-based EV startup.

  • A creditor trust, jointly managed by a committee of creditors and a trustee, will be set up to receive Jia’s ownership stake in FF’s holding company, Smart King Ltd., to satisfy his debts.
  • Creditors will only recover from 49% to 100% of what they are owed if and when the company goes public, according to filings.
  • Jia will no longer hold his interest in FF if the restructuring goes through, but is expected to return to China as a pivotal figure for FF’s business in the country.
  • The embattled Chinese entrepreneur acknowledged unpaid debts of around $3.6 billion owed to more than 100 creditors to date, 90% of which he guaranteed for his businesses in China.
  • Jia was placed on a national debtor blacklist and fled to the US in late 2017, after amassing mounting debts for his technology conglomerate LeEco due to rapid expansion and mismanagement.
  • He claimed to have repaid more than $3 billion toward his debts to date, and all his shares at Leshi (also known as LeTV), a Shenzhen-listed subsidiary of LeEco, have been frozen by Chinese courts, according to a company statement released last week.

Context: After months of furloughs, layoffs, and pay cuts, FF is struggling to retain relevance in the Chinese EV market.

  • In a recent interview with Chinese media, FF’s newly appointed CEO Carsten Breitfeld revealed plans to begin talks with municipal governments for the production and delivery of its second mass market model FF81.