Fisker suitor seeks direct appeal of credit-bid cap

Fisker Karma
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WILMINGTON, Del. (Bloomberg) -- Hybrid Tech Holdings LLC is seeking to appeal a bankruptcy judge's ruling that capped its right to "credit bid" for the failed luxury hybrid automaker Fisker Automotive Inc. at $25 million.

The case should go directly to the U.S. Court of Appeals in Philadelphia, bypassing the U.S. District Court, to let Fisker's auction proceed efficiently next month and to ensure the appeal isn't mooted by a sale, Hybrid said in court papers filed Monday in U.S. District Court in Wilmington, Del.

U.S. Bankruptcy Judge Kevin Gross ruled Jan. 17 that Hybrid's ability to use debt forgiveness to bid for the Anaheim, Calif., automaker's assets was properly limited at $25 million rather than the $75 million Hybrid proposed.

The judge said a limit would promote competitive bidding that wouldn't otherwise occur if Hybrid was permitted to use the full amount of its claim. Gross also cited questions over whether Hybrid's claim is fully secured.

Hybrid said time is of the essence with the auction close at hand and "there is no controlling authority directly addressing the issue of a bankruptcy court's authority to limit or deny a secured creditor's right to credit bid for the purposes of fostering a competitive auction."

Gross's ruling "eviscerates the rights of a secured creditor to credit bid" because the "bankruptcy code does not permit courts to arbitrarily cap a secured creditor's credit bid on the basis of the price paid to acquire the secured claim," Hybrid said.

Hybrid also cited the decision's impact on U.S. government lending programs intended to promote growth in fledgling industries, such as alternative-energy vehicles. The ruling creates "substantial uncertainty" for potential bidders on distressed assets if they can't enforce the same rights the government would have in a bankruptcy.

The failed automaker missed the first payment on a low-interest U.S loan in April. it had drawn about $192 million of an initial loan commitment of $529 million from a program intended to spur production of alternative-energy vehicles.

Fisker was denied the rest of the money in 2011 after missing milestones for its Karma luxury model. Hybrid bought $168.5 million in debt remaining on the loan from the government for $25 million.

Fisker's failure has cost taxpayers more than $130 million.

The company filed for Chapter 11 protection Nov. 22, listing debt of as much as $1 billion and assets of less than $500 million. Fisker blamed the bankruptcy of battery supplier A123 Systems Inc., safety recalls and shipments lost to Hurricane Sandy.

China's Wanxiang Group Corp., another potential buyer, has said it won't bid if Hybrid is allowed to use the entire amount of its $168.5 million claim. Wanxiang won a 2012 bankruptcy auction for most of the assets of A123 Systems for about $256.6 million.

The company will hold a Feb. 12 auction to determine the highest and best offer for its assets. Potential buyers must submit bids by Feb. 7 to take part in the auction. A hearing to approve the sale to the auction winner is scheduled for Feb. 14.

Hybrid has bid about $56 million, including $30 million in cash, while Wanxiang has offered about $36 million in cash plus equity in the new company.

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