The war between electric car startup Faraday Future and its main investor, Chinese real estate conglomerate Evergrande, appears to be over. Evergrande announced on Monday that it has agreed to restructure its $2 billion investment in Faraday Future. The conglomerate will walk away with full control over Faraday Future’s efforts in China, and both sides will drop all ongoing litigation against each other, according to a release posted to the Hong Kong Stock Exchange.

Faraday Future will receive a bridge loan from Evergrande to “overcome [the startup’s] cash flow difficulties,” spokesperson John Schilling said in an email. Those difficulties involve Faraday Future almost completely running out of cash over the last few months, which resulted in massive layoffs, furloughs, and the loss of a number of key executives, including one of the company’s three co-founders.

Crucially, Evergrande has also agreed to release its control over Faraday Future’s assets, which were secured as collateral as part of the investment, as was first reported by The Verge in April. Faraday Future had argued it wouldn’t be able to raise new investment without assets to collateralize, since it still has no current product or revenue. Evergrande’s 45 percent stake in the overall structure of Faraday Future will be backed off to 32 percent. Faraday Future will have the option to buy out Evergrande’s stake in five years. The original deal is now dead.

“Upon signing these new terms, [Faraday Future’s] equity financing and debt financing efforts will now be able to progress quickly,” the startup said in a statement. “In terms of equity financing, investors from all over the world have expressed interest in [Faraday Future], and several have already started discussions with [Faraday Future].”

Evergrande agreed to bail out Faraday Future at the end of 2017. The massive company is run by one of the world’s richest people, Hui Ka Yan, and it pledged $2 billion to the ailing EV startup over a span of three years. At the time, Faraday Future was near bankruptcy thanks to overly grand plans, an enormous workforce of some 1,500 employees, and an aborted attempt to build a $1 billion factory in the Nevada desert. It had also just endured an ugly, public separation with its CFO at the time, former BMW executive Stefan Krause.

Evergrande gave Faraday Future $800 million up front in the early months of 2018, which the startup used to tool up a more modest factory in Hanford, California to get ready for a December production target for its first car, a luxury electric SUV called the FF91. Faraday Future also began paying back suppliers, who were collectively owed around $100 million at the time.

Over the summer, Evergrande helped spin up Faraday Future’s operations in China to set the stage for an eventual dual-market strategy. It secured land for a factory and established subsidiaries in a number of provinces. Faraday Future continued to work on the FF91 here in the US, and eventually revealed a small number of pre-production units — though one caught fire shortly after an event for employees, friends, and family, as was first reported by The Verge in October.

The startup even planned a grand showcase in late August at Pebble Beach Concours d’Elegance, one of the ritziest car shows in the world. But it backed out with just 12 days to go, according to a previously unreported lawsuit. Faraday Future is now being sued for nearly $2 million over breaking the contract with The Visionary Group, the company that was planning the event.

Eventually Evergrande made it public that Faraday Future had spent through the entire $800 million by July, and that the startup’s CEO and founder Jia Yueting had asked the conglomerate for a $700 million advance on the remaining $1.2 billion. Evergrande initially agreed, court documents later showed, but asked for Jia to distance himself from Faraday Future in return. Jia’s status as a debtor in China — the tycoon is on a national blacklist there thanks to the collapse of one of his other companies, tech conglomerate LeEco — was hampering the budding efforts in China, Evergrande claimed.

This became the source of the conflict that played out between October and the very end of the year. Jia and Faraday Future claimed he took the right steps to distance himself according to Evergrande’s wishes. He transferred his controlling shares in the top offshore holding companies above Faraday Future to a family friend, and resigned his director positions in those entities.

Evergrande argued Jia hadn’t done enough, and refused to pay out the $700 million. The two sides took the case to an arbitrator in Hong Kong, and in the meantime, Faraday Future sued Evergrande in US court, accusing it of “deliberately starving” the startup into bankruptcy in order to make off with the intellectual property. A group of employees followed with a similar suit.

In the meantime, Faraday Future languished. The startup had just $18 million in cash at the start of September, court documents showed. The company still owed $59 million to suppliers, and was also supporting a payroll of about $8 million per month. Layoffs and a company-wide salary cut of 20 percent were announced in October. Those were quickly followed by the departure of a number of key executives, including co-founder Nick Sampson, who said the company was “effectively insolvent.” Hundreds more employees were subsequently placed on unpaid leave, and Faraday Future furloughed hundreds more in December.

“I cannot continue knowing the devastating [sic] impact we are having on the lives of our employees, their families and loved ones as we as the [sic] ripple effect this will have on lives throughout our suppliers and the industry as a whole,” Sampson wrote at the time.

Faraday Future now faces the daunting task of rebuilding its workforce in order to get the FF91 into production in 2019, which Matthias Aydt, the startup’s vehicle line executive, told employees at a mid-December all-hands meeting would take about $500 million. Aydt also said Evergrande’s appetite to take over Faraday Future had waned since the conflict was recently used by the Trump administration as a potential example of unfair technology transfer and intellectual property theft.

The startup has promised to bring back furloughed employees at their original salaries, but many key workers have left for other companies in the intervening months, multiple current and former employees tell The Verge. Only about 250 employees remained at the company’s Los Angeles headquarters during the furlough, down from around 1,000 earlier this year. The startup doesn’t have an exact count, though, because it doesn’t “have a way to measure it,” Aydt told employees.

https://www.theverge.com/2018/12/31/18162827/faraday-future-evergrande-settlement-restructuring-china-ev-investor