Jia Yueting, the founder and ex-CEO of Faraday Future has filed for Chapter 11 bankruptcy and restructuring in Delaware court this Monday. The EV big shot still owes almost $3.6 billion to over 100 creditors as debt in China. The Bankrupcy filing has added yet another smudge to Jia’s plummeting reputation, after the events of 2017, when China named him a national debtor, initiating his exodus to USA.
Prior to the hearing on Chapter 11, Jia offered to clear his debts via a trust backed by his ownership value in Faraday Future. However, the trust will only be in capacity to pay creditors, when Faraday Future goes public.
90% of the people or businesses to whom Jia owes money, need to agree to his restructuring plan by November 8th. In signing this deal, these entities will also agree that all the claims against Jia and his wife would be dropped, and he would be freed from personal liabilities.
At the same time, Jia has also urged his creditors to look at chapter 11 bankrupcy as a backup plan. The plan of clearing the debts would still be the same, where Jia will leverage on his stakes in the company, and pay after the IPO.
Whatever the decision is, the creditors and Jia need to come on a common agreement soon, as the conditions may worsen for the latter in future. If Faraday Future fails to raise money, the value of Jia’s stake in the company will decrease, further reducing his chance to pay back the debts. Jia also admitted that if the company is unable to make money, the company “may be forced to liquidate its remaining assets and/or initiate bankruptcy proceedings.” in which case, creditors would likely receive only a fraction of what they are owed.
The official announcement from Faraday Future stated;
The Founder and CPUO of Faraday Future, Yueting Jia(YT), has filed for bankruptcy and restructuring under Chapter 11 in the United States, this was done to address his personal debts in China.
The company further stated that it will continue to work at its usual pace toward their prime goal of going public.
