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Faraday Future's first production model, the FF91
Faraday Future struggles to raise cash
Bloomberg | 2017/12/5

The dwindling empire of billionaire Jia Yueting, who once boasted he would leapfrog Tesla, faces a new hurdle as his U.S. electric car startup struggles to raise $500 million (3.2 billion yuan). 

A convertible note of $400 million, with a 12 percent interest rate, becomes payable immediately if Faraday Future can't raise the funds by December, sources said.
The electric carmaker, which also has $100 million in unpaid bills, has not been able to line up funding as it tries to pay off Chinese investors who financed the debt, the sources said. 

Jia stumbled into a cash-flow crisis after the conglomerate he founded, LeEco, suffered a cash-flow crisis. Based in Beijing, LeEco launched a Netflix-style video streaming service, and it has also developed smartphones, TVs and electric vehicles. 

This year Jia gave up control of the video business, Leshi Internet Information & Technology Corp. He has turned his focus to Faraday, which hopes to combine Chinese cash with Western technology to become a Tesla-style maker of EVs. 

The company has struggled to raise funds because it has been unable to get Chinas regulators to approve transfers of money out of the country, one source said. 

"We decline to comment, other than we acknowledge that we are in the process of our fundraising," the company said in a statement. 

At the 2016 CES show in Las Vegas, Faraday unveiled a 1,000-hp prototype that looked like the Batmobile. Jia planned to build a $1 billion assembly plant in Nevada and launch production in 2017.
But construction was halted after LeEco faced a cash crunch caused by expansion into too many product segments. 

Now, Faraday needs additional cash to produce actual cars, rather than prototypes. In May, the company tried to raise $1 billion, a source said at the time. 

If the $500 million funding succeeds, the debt will convert into shares, the sources said.

In January, Jia secured additional funds when property group Sunac China Holdings and other investors bought 16.8 billion yuan ($2.54 billion) worth of shares in Leshi and other related companies. Of that amount, $1.5 billion was exchanged for stock owned by Jia, who later stepped down as CEO. 

Faraday has already had at least one $30 million bridge loan, the people familiar said. Employees are also owed bonuses and 2016 pay increases, the people added. 

This year, the company sought out investors that valued the business at $1.5 billion to $2 billion. But potential investors walked away after suppliers and media partners demanded money for unpaid bills. 

Tata Motors, the Indian carmaker that owns Jaguar, sharply denied Chinese media reports that it had invested $900 million in Faraday. 

Stefan Krause, who was CFO before leaving in October, prepared filings for a Chapter 11 bankruptcy while searching for alternative funds, people familiar with the filing said. Jia ultimately killed the plan along with all other proposals that would result in him losing control of the business, the people said. 

Mahindra & Mahindra of India was interested in becoming a "stalking horse" to set the opening bid as part of a court-supervised auction, the people said. Mahindra declined to comment.
Faraday said it "terminated" Krause and former Chief Technology Officer Ulrich Kranz, according to a statement posted on its website this month. Both men told Bloomberg News they quit in October. 

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