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Fisker Turning to Private Investors After DOE Put Loan on Hold

Good. Via the Wall Street Journal:

As its loan with the federal government remains on hold, Fisker Automotive is scrambling to raise capital in other ways–through equity sold to individuals that are getting some freebies to sweeten the deal, and through a private debt deal that is being led by the Royal Bank of Canada, VentureWire has learned.

Even as it’s trying to raise $87 million in new equity marketed to investors by brokerage firm Advanced Equities, along with the debt deal, the company is continuing to sell its first car, the luxury plug-in Karma. “We have 1,700 cars sold now,” said Ray Lane, managing partner at Kleiner Perkins Caufield & Byers and director on Fisker’s board.

In the first quarter, the company said it drew in $100 million in revenue. “I’m looking at about $400 million in revenue this year. That would make it the fastest growing start-up ever,” Lane said.

These projections, he added, don’t include sales in China and Middle East, where the company is building relationships with dealerships.

Fisker Automotive, however, is not profitable, said Lane. The Irvine, Calif.-based company still needs new capital to finance operations and to start ordering parts and production tools to build its next car model, Atlantic, which is central to the viability of the business longer-term.

“You don’t make money until volumes are up,” said Lane. The company needs to build the Atlantic, which would increase its volumes, and amortize its fixed costs across more units, as well as allow Fisker to negotiate better deals with suppliers.

“We can’t move forward without the debt,” said Lane, referring to the Atlantic program.

For a while, Irvine, Calif.-based Fisker was operating under the assumption that it has $529 million in federal loans, but last year the Department of Energy, which handles the loans, suspended issuing new checks because the car company missed some milestones. Fisker delayed the release of Karma and sold fewer Karmas than it promised under the DOE loan agreement. As a result of the loan suspension, Fisker stopped additional work on a plant in Delaware where it was planning to build the cars and laid off some employees.

The company has been using equity, the most expensive capital, to pay for the development of Atlantic to date. “We spent $130 million on the Atlantic,” Lane said. “No one wants to spend” more equity,” he said.

That is the reason Fisker is in discussions with a syndicate of private lenders, led by the Royal Bank of Canada, he added.

A spokesman for the Royal Bank of Canada didn’t respond to a request for comment. Roger Ormisher, spokesman for Fisker, declined to comment on any involvement of the bank. “We’ve opened every door,” said Ormisher, adding that the company is evaluating different options.

Negotiations with the DOE are ongoing, said Ormisher. He declined to discuss Fisker’s cash-burn.

The rest here.


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