June 11 (Bloomberg) -- Coda Holdings Inc., parent of the electric-car maker that sold fewer than 100 vehicles, won court approval of a $25 million sale to a group led by a Fortress Investment Group LLC unit.
U.S. Bankruptcy Judge Christopher Sontchi at a hearing today in Wilmington, Delaware, approved the sale after overruling objections from a lawyer for terminated workers and the U.S. Trustee, an arm of the Justice Department that monitors bankruptcy cases.
The Fortress group will pay $1.7 million in cash and the rest of the purchase price will come from forgiving debt from a $5 million bankruptcy loan and debt from notes owned by Fortress affiliates. Coda will focus on its energy-storage business and its automotive assets will be liquidated.
The sale was negotiated as part of a broader deal brokered with the official committee of unsecured creditors that will lay the groundwork for a potential reorganization plan. In addition to the $1.7 million in cash, $1.9 million of the bankruptcy loan will remain with the estate to help pay administrative claims.
“This has been a lengthy and complicated process,” Sontchi told the attorneys. “It was a close call,” the judge said. The opposing arguments were “tempered by the fact the creditors’ committee is onboard” with the sale, after negotiating for better terms under the deal, he said.
The U.S. Trustee argued that what he called potential claims for fraudulent transfers, against two officers for the forgiveness of loans before the bankruptcy, were being inappropriately sold as part of the deal.
“The purpose of a sale is not to protect insiders in this ring, but to maximize value,” David L. Buchbinder, a lawyer for the U.S. Trustee, told Sontchi.
The alleged claims are “not particularly strong,” Roberto J. Kampfner, a lawyer for Coda, told the judge.
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 in court documents filed in May.
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.
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.
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.
Coda had 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, Aeris Capital, Angeleno Group LLC, billionaire Philip Falcone’s Harbinger Capital Partners LLC and Riverstone Holdings LLC, Coda said in 2011.
The case is In re Coda Holdings Inc., 13-11153, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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