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EV Startup Faraday Future Announces $225 Million in Bridge Financing

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【Summary】Financially strapped electric automaker Faraday Future (FF) has received another batch of fresh funding. The company announced a series of strategic moves designed to support completion and launch of its first electric vehicle, the flagship FF91 and support of its vendor and supply chain.

Eric Walz    Apr 30, 2019 5:00 AM PT
EV Startup Faraday Future Announces $225 Million in Bridge Financing

Financially strapped electric automaker Faraday Future (FF) has received another batch of fresh funding. The company announced a series of strategic moves designed to support completion and launch of its first electric vehicle, the flagship FF91 and support of its vendor and supply chain.

The funds are in the form of a bridge loan from Chicago-based Birch Lake Associates, LLC, a boutique merchant bank that invests intellectual and financial capital in undervalued high-potential companies. FF said the up to $225 million bridge financing facility consists of a senior secured financing of $75 million and a vendor trust of up to $150 million.

The secured vendor trust program of up to $150 million has been created with Birch Lake's support to provide greater confidence to FF's key suppliers and obtain their commitments to support the scheduled production launch of FF 91.

FF also said it resolved all previous disputes among its major shareholders, positioning the company for substantial capital raising during 2019.

"Birch Lake is pleased to partner with FF at this critical juncture and is looking forward to assisting FF toward becoming a leading manufacturer of EVs in the United States, China and beyond," said Birch Lake CEO Jack Butler. "FF's technology, product strategy and unwavering commitment to its production launch of the FF 91 are impressive."

FF announced that its biggest suppliers and vendors have the opportunity to benefit in a "vendor trust program", allowing them to exchange unsecured trade claims for trust interests that will hold a secured claim equal to all vendor claims in the trust, including a repayment schedule to be completed during 2019.

As part of the vendor program, Birch Lake has agreed to provide financing to pay all past due amounts for approximately 60 percent of FF's suppliers, including smaller vendors who are owed less than $20,000.

"FF is proud to call Birch Lake one of its strongest supporters and financial partners, and we thank them and our employees' perseverance for helping us see FF91 to reality," said FF CEO Jia "YT" Yueting.

In March, FF signed a joint venture agreement with Chinese internet and mobile game distributor The9 Limited, in which The9 will make capital contributions of up to $600 million in three equal installments to the JV, and FF will make contributions including its usage rights in a piece of land in China for electric car manufacturing.

FF granted the JV an exclusive license to manufacture, market, distribute and sell the Faraday Future V9 concept model based on the FF91 and other potential electric models in China.The expected annual production capacity of the joint venture is 300,000 cars, and the first pre-production car is expected to roll off the production line next year.

faraday-future-ff-91-at-2018-ces.jpg

Faraday Future's FF91 luxury electric SUV

Faraday Future's Financial Struggles

Faraday Future was once considered a serious rival to electric carmaker Tesla, but the startup has struggled financially over the past two years, which delayed the launch of the company's flagship FF91 EV numerous times.

The FF91 is a high-tech, luxury electric SUV. The vehicle was first unveiled at CES in 2017. Faraday says the FF91's electric powertrain produces 1,050 horsepower and reaches 0-60 mph in just 2.4 seconds.

In Dec 2017, Faraday received a $2 billion lifeline from Evergrande to stay afloat. Evergrande Health Industry Group is the healthcare division of Hong Kong-based real estate group Evergrande, one of the world's most valuable real estate companies.

Evergrande agreed to invest the money in FF over the span of three years in exchange for a 45 percent share of FF stock, starting with an initial payment of $800 million. However, Evergrande had accused Faraday of squandering the initial $800 million payment and was cut off from the remaining $1.2 billion it agreed to invest, putting the automaker in a dire financial situation as the case makes its way through arbitration in a Hong Kong court.

In 2018, Faraday was forced to furlough most of its employees and shut down production after it could not pay its suppliers. The financial troubles led to a mass exodus of top executives at the automaker, including Faraday co-founder Nick Sampson, who said in Oct 2018 the company was "effectively insolvent." However, with its latest fundraising, FF is getting back on track.

FF CEO Jia said of the company's newly sharpened focus: "I also want to give a special thank you to our entire supply chain team, our suppliers and vendors who have stood by our side," said Jia. "Together, we have the ability to create disruptive products like FF 91 and additional future products that will bring new ideas to the traditional auto industry."

Meanwhile, FF says that it continues to make steady progress on the development of its flagship FF91, finalizing the electric vehicle for production. Its growing fleet of pre production vehicles are being used as a testbed for cloud-connectivity, software releases and other validation measures as the company finalizes the FF 91 for production.


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