The Founder and CPUO of Faraday Future, Yueting Jia(YT), has filed for bankruptcy and restructuring under Chapter 11 in the United States, reports the company.
It was done to address his personal debts in China. In connection with the filing, a ‘creditor trust’ for the benefit of YT’s creditors is planned to be established, which will be jointly managed by a committee of creditors and the trustee. YT plans to transfer all his existing equity interest in Smart King Limited, the global holding company for Faraday Future, to the creditor trust to better protect his creditors and repay his debt.
This matter will not affect any of FF’s normal business operations. The Plan will in fact have multiple benefits for FF in the following ways:
- This Plan provides YT an opportunity to address his personal debts, help facilitate FF’s equity financing efforts and prepare for an IPO, and further advance the implementation of FF’s US-China dual home market strategy.
- YT will continue to be involved with the FF team to complete its strategic goals in the capacity of FF’s founder and Chief Product & User Officer (CPUO) and to maximize the value of FF and the assets in the creditor trust. The Plan benefits all stakeholders.
- This filing for restructuring will not affect the ownership of employee stock options or shares in FF acquired upon exercise of employee stock options. Employee stock options will remain an effective tool to help FF continuously assist in the recruitment of future talent.
- Over 90% of YT’s debts are debts he guaranteed for his businesses in China. Since certain creditor froze all the assets and operating accounts of YT and LeEco group (which are worth substantially greater than the default amount) that directly caused a halt to the ordinary operation of LeEco group and led to its collapse, as of today, YT has repaid over US$3 billion worth of debts, with unpaid amount of around $3.6 billion. His net debt is around US$2 billion, after deducting the value of the assets that are frozen but yet to be disposed in China and the guarantees for certain convertible loans.
- After YT pays off his guarantee obligations for the benefit of the original obligors including borrowers and other guarantors, YT will step into the shoes of the creditors and become the new creditors of such original obligors. YT team plan to discuss with such original obligors regarding the relevant documents pursuant to which the original obligors will pay YT and wish to receive the parties’ cooperation and support thereto.
- After the successful completion of his individual restructuring, YT will have transferred all his personal assets and related economic rights recognized by the court in the United States to creditors and his personal guarantee and debt obligations will be deemed to be satisfied and discharged. It is anticipated that he can go back to China and push forward and implement FF’s dual home market strategy. This brings great impetus to FF’s capital raising efforts and planned future IPO, and it is particularly significant for the rapid progress of FF’s China business.
- YT gave up his entire interest in the FF shares and related economic interest for the sole purpose of paying off his debts completely and making FF a great company. Proposed by YT, FF established a partnership program, which sets solid foundation for an advanced corporate governance structure and talent base. FF will continually attract global talent across industries through the partnership program. As the founder and Chief Product and User Officer, YT will continue to inspire the management team to achieve strategic goals, maximize the value of FF and the creditor trust, so as to achieve the goal of debt repayment for all creditors through bringing up the value of the trust assets.
- YT is soliciting votes of his creditors for the sole purpose of approving his personal restructuring plan, but not with respect to the specific debt amount of the creditors. The debt amount of each creditor will be reviewed and confirmed by the U.S. court.