A request from Jia Yueting’s Faraday Future asking an arbitrator to void its $2 billion investment agreement with a unit of Evergrande Health Industry Group was rejected late last week, keeping the unit of China’s largest property developer by sales in control of the troubled electric car maker.
So far, Jia Yueting has produced more conflict than cars at Faraday Future
The Hong Kong Arbitration Center upheld Evergrande Health’s role in approving new financing for Faraday, according to an account in mainland news site thepaper.cn, during the same week that the flailing supercar maker was reported to be laying off staff and cutting salaries of remaining team members across the board.
The judgement came less than three weeks after Faraday had brought the case against the property developer controlled by mainland billionaire claiming that Evergrande had failed to make good on a promised $500 million cash injection.
Faraday Claims Victory as Request Denied
In a social media post, California-based Faraday put a brave face on the decision, which has yet to be publicly announced by the dispute resolution body, saying, “The arbitrators have ruled that Evergrande may no longer stop Faraday from getting money from other sources of financing in future.” While the arbitrator’s ruling maintained Evergrande’s control in deciding terms of any financing, Faraday indicated that it will begin worldwide search for a bailout.
“An only $500 million external credit line was granted to Faraday Future, with requirements for lender’s valuations also imposed, which means (the allowed amount) will merely enable the company to survive. The carmaker’s use of the ruling for commercial exploitation is just puffing up its cheeks for appearances sake,” a senior financial staffer from Faraday was cited as saying in an account in Shanghai-based business site Yicai Global.
The arbitrator’s ruling was said to allow Faraday to seek the $500 million credit line on the grounds that the company is on the verge of bankruptcy.
Car Maker Conflict Picks Up Speed
Since Faraday asked for arbitration, the conflict between the car maker and its new owner had escalated to near-open warfare. News reports indicated that Faraday Future staff had refused to hand over the company seal and finance seal of two Faraday subsidiaries on the mainland, and an employee had sued Evergrande FF China, a local unit of the company for damaging their reputation, demanding an apology and RMB 10,000 as compensation for psychological damage.
Faraday has said that it hopes to begin producing its first car next year
On October 22nd,, Faraday Future announced that all staff would need to take a 20 percent pay cut, and some team members would be laid off, because of what it said was a failure by Evergrande to meet its financial obligations to the company.
Evergrande Ownership Upheld
Faraday had been seeking $500 million in fresh cash from Evergrande when it brought the arbitration complaint, after the property developer had paid $860 million in June to take a controlling 45 percent stake in the company, which has yet to begin production of its first vehicle.
That investment was in addition to an earlier $800 million that Evergrande had paid in may to take control of the company’s new production base in Guangdong province, with a commitment to invest another $600 million into the business in 2019 and 2020.
Evergrande Health announced its own account of the arbitrator’s ruling to the Hong Kong stock exchange on Friday, noting that Faraday was only allowed to seek new financing “under stringent conditions” and that Evergrande “continues to enjoy pre-emptive rights.”
Leave a Reply