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Bankruptcy to Seek Sale
By Michael
Bathon & Kit Chellel - May
1, 2013 5:07 PM CT
Coda Holdings Inc., parent of
the electric-car maker backed by billionaire Philip
Falcone, filed for bankruptcy and will seek to sell its assets to a group
led by a Fortress
Investment Group LLC (FIG) unit for $25 million.
The Los Angeles-based company,
whose Coda Automotive unit also sought court protection, listed assets of as
much as $50 million and debt of as much as $100 million today in the Chapter 11
filing in Wilmington, Delaware. The company said it intends to sell its assets
within 45 days.
The closely held company’s Coda Automotive unit listed assets
of as much as $50 million and liabilities of as much as $100 million in the
Chapter 11 filing in Wilmington, Delaware, today. Photographer: Andrew
Harrer/Bloomberg
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Coda’s bankruptcy is at least
the third by an electric vehicle-related company in just over a year. A123 Systems Inc.
(AONEQ), a battery supplier to Fisker Automotive Inc., another
California-based maker of electric cars, filed for bankruptcy in October. Ener1
Inc., also a maker of batteries for electric cars, entered bankruptcy in January
2012.
While A123 and an Ener1 unit received U.S. government funds, Coda didn’t. The
company applied for a $334 million loan in May 2010 and withdrew the request in
April 2012.
“After two years of uncertainty, we needed to move forward with our business
plan independent of the loan,” Matt Sloustcher, a Coda spokesman, said in an
e-mail today.
Production Delays
Coda was forced to seek bankruptcy protection because of production delays,
insufficient capital to market and sell its sedan, and slow growth for the
electric-vehicle market, which it blames on the scarcity of charging stations,
according to a declaration by Chief Restructuring Officer John P. Madden. Coda
will focus on its energy-storage business, Chief Executive Officer Phil Murtaugh
said in a statement today.
Sales of the Coda sedan, built off China-based Hafei Motor Co.’s Saibao
platform, fell short of expectations, with fewer than 100 units sold since
entering the market in March 2012, according to court papers. Complications
adapting the sedan to an electric platform and meeting U.S. regulatory standards
delayed production until a year after originally anticipated in November 2011.
Closely held Coda, which
counted former U.S. Treasury Secretary Henry
Paulson as an investor, pitched its vehicle as a “real world” car with
better range, battery-pack life and acceleration than competitors such as Nissan Motor
(7201) Co.’s Leaf, Ford Motor Co. (F)’s
Focus EV and Mitsubishi
Motors Corp. (7211)’s i-MiEV hatchbacks. The compact, which cost $37,250
before a $7,500 U.S. tax credit, averages 88 miles (142 kilometers) per charge
and can travel as far as 125 miles, according to U.S. Environmental Protection
Agency estimates.
Shrinking Market
About 87,000 electric and
plug-in hybrid cars have been sold in the U.S., with two years left to achieve
President Barack Obama’s target of 1 million sales for the industry.
While sales of battery-only and
plug-in hybrids are rising, the pace trails optimistic goals set by advocates,
including Nissan and Renault SA (RNO) Chief
Executive Officer Carlos Ghosn, who predicted electric vehicles would be 10
percent of global sales by 2020.
U.S. sales of rechargeable
autos totaled 50,288 last year, led by General Motors Co.
(GM)’s Volt plug-in, up from 17,805 in 2011, based on data compiled by
Bloomberg. Sales for the segment totaled 17,842 in this year’s first quarter.
Electric-only vehicle sales totaled 13,542 in 2012, a 34 percent increase over
the 10,104 sold in 2011, according to data compiled by Bloomberg.
A U.S. congressional committee is investigating the Energy Department’s loans
for alternative-fuel vehicles after the manufacturers have been plagued by
financial problems.
A123, based in Waltham, Massachusetts, used $132 million in federal grant
money to build two plants in Michigan. Fisker fired three quarters of its work
force last month and missed its first payment on a U.S. government loan.
Equity Investors
Coda raised about $344 million
in equity investments since its founding, according to court documents.
Investors included New World Strategic Investment Ltd., Indus Capital and Och-Ziff
Capital Management Group LLC (OZM), Aeris Capital, Angeleno Group LLC,
Falcone’s Harbinger Capital Partners LLC and Riverstone Holdings LLC, Coda said
in 2011.
The company owes about $77.5 million in notes and loans, according to court
papers. Coda owes Hafei, its biggest unsecured creditor, $2.7 million. Coda and
its affiliates collectively owe about $17 million to their 30 largest unsecured
creditors.
A group led by a Fortress affiliate agreed to provide a $5 million
delayed-draw loan to help fund operation through the sale process, according to
court papers. The Fortress unit will act as the lead bidder at a
court-supervised auction and will buy the company for $25 million if no other
competing offers surface.
The group may bid debt rather than cash. Coda requested a May 16 hearing to
set guidelines to govern the sale process. The company wants a deadline of May
31 for competing offers, a June 3 auction if other bids are received, and a June
6 hearing to seek approval of the sale.
California Assembly
The Coda sedan’s chassis is
built in China through a partnership with Hafei, with final assembly in Benicia,
California.
Lithium-iron-phosphate cells for its 1,000-pound (454-kilogram) battery pack are
from LIO Energy Systems, a joint venture of Coda and China’s Tianjin Lishen
Battery.
Coda said last year that it
would produce battery-powered autos with China’s Great Wall
Motor Co. (2333) that would be sold under the U.S. company’s name starting
in 2014.
The case is In re Coda
Automotive, 13-bk-11154, U.S.
Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporters on
this story: Michael Bathon in Wilmington at mbathon@bloomberg.net;
Kit Chellel in London at cchellel@bloomberg.net
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