Embattled Chinese entrepreneur Jia Yueting, who filed for bankruptcy in October, continues to struggle to make a deal with his creditors, after they rejected his proposal that he and his wife be absolved from their personal responsibility for the debts, Caixin reported.
No final agreement on a bankruptcy settlement was reached at a meeting on Nov. 25 in the US, a creditor who attended the meeting told Caixin on condition of anonymity.
All of the creditors at the meeting objected to Jia’s proposal that he and his wife — who are in the middle of a divorce — no longer be personally responsible for the debts, the source said.
The source said that Jia then told the meeting that he would continue to personally bear responsibility for the debt.
Jia faces claims of about US$2 billion from a total of 154 creditors, according to previous court filings.
Jia filed for Chapter 11 bankruptcy in October in the US state of Delaware. That began a process of the entrepreneur, who was placed on a debtor’s blacklist in China, negotiating with the creditors on a restructuring of his debts, Caixin reported.
According to a statement posted by Faraday at the time, Jia planned to set up a “creditor trust” that would receive all of Jia’s equity interest in Smart King Ltd., the holding company that controls electric carmaker Faraday Future.
The trust would be jointly managed by a committee of creditors and a trustee. Jia previously set Nov. 8 as the deadline for creditors to vote on whether or not to accept this plan. However, this was delayed as the plan did not have sufficient creditor support, with one creditor saying that they were unsure about the carmaker’s money-making prospects.
The carmaker’s first model, the FF91, was unveiled in 2017, the company’s website says, adding that production is set to begin “in the near future.”
Creditors at the meeting last week worried that if the couple were no longer responsible for the debts, they could face massive losses if Faraday Future, the California-based electric carmaker Jia founded and of which he was previously CEO, doesn’t one day make a successful IPO.
Jia Yueting told the meeting that his debt problems have made it harder for Faraday to attract new investors, but that he hopes the debt issues will be resolved by the end of February, Caixin reported.
According to documents filed with the court, there will be an official creditor’s meeting on Dec. 6. That will be followed by a hearing on Dec. 18 at which the court will approve or reject an amended reorganization plan filed by Jia and his legal team. If approved, the judge will set a deadline for the creditors to vote on the new plan.
Jia currently holds 33% of Faraday. Before that, he was known for founding the former star online video firm LeEco, which has been troubled since 2016 after taking on too much debt during a frenzied expansion.
Jia was later blacklisted as a debt defaulter by Chinese regulators and barred indefinitely from traveling by rail or air in the country for failing to repay about 480 million yuan (US$69.7 million) in debt owed by LeEco, Caixin reported.
Faraday has run into financial issues, with sources saying its headcount had dropped to 350 by the middle of this year. The company had claimed a headcount of 2,000 at the end of 2018.
Jia stepped down as Faraday’s CEO in September, but remains the company’s chief product and user officer, a title he will retain even after the bankruptcy filing. His chief role was succeeded by BMW veteran Carsten Breitfeld, who had held positions at two China-based EV startups before.