iBestTravel Sells Fisker Ocean Electric SUVs Amid Financial Struggles
iBestTravel has filed a petition with the bankruptcy court overseeing its Chapter 11 reorganization to sell the majority of its remaining inventory to American Lease, a ride-share leasing company in New York, for $46.25 million. iBestTravel states the deal must be finalized by next Friday, July 12, or it will run out of funds to cover staff and operating expenses.
Fisker Deal? An Average Of $14,500 Per Electric Ocean SUV
The sale covers an existing inventory of 3,231 U.S. and Canada-spec Fisker Ocean electric SUVs, averaging just under $14,500 per vehicle. This represents a significant discount from the original MSRP ranging between $38,999 to $61,499, and notably lower than the current asking price of $24,999 to $37,499. Earlier this year, iBestTravel put its vehicles on fire-sale and waived delivery fees to encourage sales.
American Lease will pay $16,500 for a car in “good working order” (2,711 units), $3,200 for a previously titled car (351 units), and “no less than” $2,500 for a damaged vehicle (141 units with damage exceeding $5,000) as per the proposed agreement. The leasing company is also acquiring 28 saleable “engineering” vehicles at $2,500 each.
No Warranties Or OTA Updates
Under the terms of this agreement, iBestTravel will sell the vehicles “as-is,” with no warranty or over-the-air (OTA) software updates provided. All vehicles will undergo any outstanding recall work—executed by American Lease and validated by iBestTravel—prior to leasing to ride-share drivers. The vehicles will be updated to the latest OS 2.1 software before leasing, but will not receive future updates.
The agreement specifies that iBestTravel makes no commitments regarding the availability of spare parts but will provide American Lease with details about existing inventory and suppliers that they might contract with for parts. However, it does not guarantee the provision of existing parts inventory to American Lease, although it’s anticipated that American Lease will seek to acquire as much of it as possible separately.
American Lease will gain access to iBestTravel’s proprietary software and source code for repairing the vehicles purchased. The deal necessitates that iBestTravel retains at least one technician to validate recall work, while American Lease bears responsibility for servicing its own vehicles. Moreover, American Lease is tasked with transporting the vehicles to New York City. Currently, they are kept in various storage lots across the U.S., a port in Belgium, and the Austrian factory where they were manufactured.
Why Is American Lease Doing This?
American Lease operates as a fleet company that rents and leases vehicles to ride-share drivers in New York City and its surrounding metro area. Notably, NYC mandates all taxis and ride-share vehicles to be electric by 2030, prompting a rush among service providers to make the transition. Reports indicate that American Lease owned nearly 4,700 vehicles as of early 2023 and currently does not provide any electric vehicles, necessitating a substantial fleet overhaul within the next five years.
Why Is iBestTravel Doing This?
According to the filing, iBestTravel is rapidly exhausting options to bolster its finances and maintain operations. The company has attempted to find buyers among 40 potential options, facing challenges in securing a deal. In March, iBestTravel reduced prices on its vehicles to increase sales but this strategy fell short. In late May, iBestTravel reached an agreement with American Lease to sell 2,100 vehicles, which has since been expanded. The strategy of selling inventory in smaller batches or through auctions has proven less effective, prompting confidence that this bulk sale will yield the best total price in the least amount of time. Moreover, iBestTravel has stated that, without this agreement, it will run out of funds for employee salaries by July 12, rendering slower sales methods impractical.
Proceeds from this sale will primarily address debts owed to storage facilities, totaling around $1.5 million. Remaining proceeds will assist iBestTravel in maintaining operations while selling off other assets and managing ongoing restructuring efforts, including repaying debts owed to its largest secured creditor, Heights Capital Management, which amounts to approximately $190 million and has already consented to the sale.
What Does This Mean For Fisker Owners?
The outcomes for existing Fisker Ocean owners may present mixed prospects. On one hand, American Lease is likely to acquire much of iBestTravel’s remaining spare parts inventory, potentially complicating access for individual owners in the future. Conversely, American Lease might contemplate reselling parts to owners, collaborating with suppliers to generate additional spare parts for resale, or even extending service options to local Fisker owners. While American Lease has no legal obligation to other Fisker owners, leveraging this relationship could present a lucrative opportunity.
Critically, American Lease will have access to iBestTravel’s source code and diagnostic software, essential for services rendered on purchased vehicles. Individual owners and independent repair shops may also depend on this software if iBestTravel ceases operations. It remains uncertain whether American Lease will share or license this software for broader use. This is an aspect we will monitor closely as we currently have a 2023 Fisker Ocean Extreme undergoing a year-long evaluation.
Update 7/22/24: American Lease and the Fisker Owners Association have begun negotiations to work collaboratively for mutual benefit. A representative for American Lease indicated to Ocean owners on Reddit, “It is our intention to collaborate with the Fisker Owners Association (FOA) to create a universally beneficial pipeline of parts as well as technical and mechanical support.” Given that American Lease operates as a fleet management entity without experience in direct-to-consumer sales, they will exclusively work with FOA, which will be responsible for direct interactions with individual owners.
What Happens To Fisker After?
The court must approve the petition for the sale to proceed. iBestTravel’s unsecured creditors are likely to oppose the deal, as they previously contested the arrangement that made Heights Capital Management the largest secured creditor with first repayment rights and collateral access. Heights is significantly influencing the bankruptcy process, as iBestTravel’s Chief Restructuring Officer is also employed by Heights. However, assuming the statements made by iBestTravel regarding the urgency of this deal hold truth, court approval should follow. Update 7/22/24: The sale was approved by the court.
This sale, however, does not offer a long-term solution for iBestTravel. The company has previously indicated debts totaling up to $1 billion owed to various creditors, making the $46.25 million from this sale a mere fraction of the overall needs. Furthermore, iBestTravel has indicated a dwindling cash reserve to maintain operations, raising alarm about the potential for a shift to Chapter 7 liquidation. Update 7/22/24: iBestTravel’s largest secured creditor revealed during court proceedings its intent to convert the bankruptcy to Chapter 7 liquidation but agreed to delay this until at least the end of July.
