Electric-Car Maker Coda Files for Bankruptcy to Seek Sale
By - May 1, 2013
Coda Holdings Inc., parent of the electric-car maker backed by billionaire Philip Falcone, filed for bankruptcy and will seek to sell its assets to a group led by a Fortress Investment Group LLC (FIG) unit for $25 million.
The Los Angeles-based company, whose Coda Automotive unit also sought court protection, listed assets of as much as $50 million and debt of as much as $100 million today in the Chapter 11 filing in Wilmington, Delaware. The company said it intends to sell its assets within 45 days.
Coda’s bankruptcy is at least the third by an electric vehicle-related company in just over a year. A123 Systems Inc. (AONEQ), a battery supplier to Fisker Automotive Inc., another California-based maker of electric cars, filed for bankruptcy in October. Ener1 Inc., also a maker of batteries for electric cars, entered bankruptcy in January 2012.
While A123 and an Ener1 unit received U.S. government funds, Coda didn’t. The company applied for a $334 million loan in May 2010 and withdrew the request in April 2012.
“After two years of uncertainty, we needed to move forward with our business plan independent of the loan,” Matt Sloustcher, a Coda spokesman, said in an e-mail today.
Production Delays
Coda was forced to seek bankruptcy protection because of production delays, insufficient capital to market and sell its sedan, and slow growth for the electric-vehicle market, which it blames on the scarcity of charging stations, according to a declaration by Chief Restructuring Officer John P. Madden. Coda will focus on its energy-storage business, Chief Executive Officer Phil Murtaugh said in a statement today.
Sales of the Coda sedan, built off China-based Hafei Motor Co.’s Saibao platform, fell short of expectations, with fewer than 100 units sold since entering the market in March 2012, according to court papers. Complications adapting the sedan to an electric platform and meeting U.S. regulatory standards delayed production until a year after originally anticipated in November 2011.
Closely held Coda, which counted former U.S. Treasury Secretary Henry Paulson as an investor, pitched its vehicle as a “real world” car with better range, battery-pack life and acceleration than competitors such as Nissan Motor (7201) Co.’s Leaf, Ford Motor Co. (F)’s Focus EV andMitsubishi Motors Corp. (7211)’s i-MiEV hatchbacks. The compact, which cost $37,250 before a $7,500 U.S. tax credit, averages 88 miles (142 kilometers) per charge and can travel as far as 125 miles, according to U.S. Environmental Protection Agency estimates.
Shrinking Market
About 87,000 electric and plug-in hybrid cars have been sold in the U.S., with two years left to achieve President Barack Obama’s target of 1 million sales for the industry.
While sales of battery-only and plug-in hybrids are rising, the pace trails optimistic goals set by advocates, including Nissan and Renault SA (RNO) Chief Executive Officer Carlos Ghosn, who predicted electric vehicles would be 10 percent of global sales by 2020.
U.S. sales of rechargeable autos totaled 50,288 last year, led by General Motors Co. (GM)’s Volt plug-in, up from 17,805 in 2011, based on data compiled by Bloomberg. Sales for the segment totaled 17,842 in this year’s first quarter. Electric-only vehicle sales totaled 13,542 in 2012, a 34 percent increase over the 10,104 sold in 2011, according to data compiled by Bloomberg.
A U.S. congressional committee is investigating the Energy Department’s loans for alternative-fuel vehicles after the manufacturers have been plagued by financial problems.
A123, based in Waltham, Massachusetts, used $132 million in federal grant money to build two plants in Michigan. Fisker fired three quarters of its work force last month and missed its first payment on a U.S. government loan.
Equity Investors
Coda raised about $344 million in equity investments since its founding, according to court documents. Investors included New World Strategic Investment Ltd., Indus Capital and Och-Ziff Capital Management Group LLC (OZM), Aeris Capital, Angeleno Group LLC, Falcone’s Harbinger Capital Partners LLC and Riverstone Holdings LLC, Coda said in 2011.
The company owes about $77.5 million in notes and loans, according to court papers. Coda owes Hafei, its biggest unsecured creditor, $2.7 million. Coda and its affiliates collectively owe about $17 million to their 30 largest unsecured creditors.
A group led by a Fortress affiliate agreed to provide a $5 million delayed-draw loan to help fund operation through the sale process, according to court papers. The Fortress unit will act as the lead bidder at a court-supervised auction and will buy the company for $25 million if no other competing offers surface.
The group may bid debt rather than cash. Coda requested a May 16 hearing to set guidelines to govern the sale process. The company wants a deadline of May 31 for competing offers, a June 3 auction if other bids are received, and a June 6 hearing to seek approval of the sale.
California Assembly
The Coda sedan’s chassis is built in China through a partnership with Hafei, with final assembly in Benicia, California. Lithium-iron-phosphate cells for its 1,000-pound (454-kilogram) battery pack are from LIO Energy Systems, a joint venture of Coda and China’s Tianjin Lishen Battery.
Coda said last year that it would produce battery-powered autos with China’s Great Wall Motor Co. (2333) that would be sold under the U.S. company’s name starting in 2014.
The case is In re Coda Automotive, 13-bk-11154, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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