The Wall Street Journal
Electric-Car Maker Faraday Secures Rescue Loan
Tim Higgins andRyan Dezember
3 August 2017
Company’s main investor, Chinese billionaire Jia Yueting, faces financial uncertainty
Faraday Future unveils its FF 91 electric car during a January news conference in Las Vegas. The company began facing questions about its finances last year as it fell behind in payments to suppliers. PHOTO: ASSOCIATED PRESS
Faraday Future, a high-profile electric-car startup, has pledged its corporate headquarters in Los Angeles as collateral to secure a rescue loan intended to keep the lights on while it seeks new investors, according to people familiar with the matter.
The company has agreed to borrow about $14 million from Innovatus Capital Partners LLC, a New York investment firm, for a term of one year, the people said. The loan comes as Faraday’s main investor, Chinese billionaire Jia Yueting, faces financial uncertainty at LeEco Holdings, raising questions about the auto maker’s future.
A Shanghai court in July froze $181 million in assets partially owned by Mr. Jia over a missed interest payment, and an additional $2.3 billion in shares in the firm’s listed unit. LeEco had run into a cash crunch as Mr. Jia chased increasingly splashier deals, including an abandoned $2 billion agreement to buy U.S. TV-maker Vizio Inc.
Faraday, which began facing questions about its finances last year as it fell behind in payments to suppliers, has stressed it is run separately from LeEco, and company executives tried to sound confident in January when revealing an electric sport-utility vehicle called the FF 91 that promised to take on Tesla Inc. in the luxury electric-vehicle market.
The new loan is designed to help Faraday keep operating while it seeks more lasting financial support, people familiar with the deal said. The loan is secured by the company’s suburban Los Angeles offices.
It comes as Stefan Krause, who joined Faraday as global chief financial officer in March, works to bring the company’s ambitions in line with its finances, including looking to raise $1 billion in the next year from outside investors. Faraday is targeting to begin production of the FF 91 in late 2018.
Mr. Krause, formerly finance chief at BMW AG and Deutsche Bank AG , was brought in after several U.S. leaders departed ahead of the January vehicle reveal. He recently added operating chief duties and recruited Ulrich Kranz, the former leader behind BMW’s electric vehicle project, as chief technology officer.
In July, the company shelved plans to build a $1 billion factory in Nevada and announced it was looking for a manufacturing facility to begin production more quickly. The newly borrowed money could help enable the company to land a new factory, one of the people familiar with the effort said.
Innovatus was launched last year by David Schiff and Andrew Dym, who previously ran a unit of Perella Weinberg Partners LP that invested in physical and financial assets. Like the Perella Weinberg funds that they managed, Innovatus invests in both equity and debt, typically with some tie to tangible assets and an income-producing component.
Innovatus is among the industry-agnostic investment firms that have emerged since the financial crisis with eyes toward the sort of deals that once flowed to so-called special situations at banks. Banks have largely abandoned such businesses, leaving room for the likes of Blackstone Group LP’s Tactical Opportunities unit and Innovatus to sift through deals ranging from stakes in oil wells and real estate to buying ships and airplanes and making esoteric business loans.
Innovatus, for example, earlier this year lent $17 million to medical device maker TransEnterix Inc. The loan is secured by the company’s assets, and its terms allow TransEnterix to make interest-only payments so long as it reaches milestones in its efforts to win approval from U.S. regulators for a robotic system aimed at minimally invasive surgeries.