The dust is starting to settle for Coda Automotive as it wends its way through bankruptcy proceedings. While formal agreements needed to be submitted to the court for approval, the judge granted a request by the parties to sign final orders approving the failed electric carmaker's debtor financing and sale plans.
Coda's attorneys had met behind closed doors for several hours with creditors to resolve disputed issues. Attorneys for the US trustee and official creditors committee had argued in court papers that Coda's financing and sales plan was tipped in favor of a group of lenders led by an affiliate of Fortress Investment Group. They didn't like the lead, or "stalking horse," bid of $25 million that the Fortress affiliate had placed. The stalking horse is also called a "credit bid" where a lender uses owed debt to buy a company's assets rather than cash. Judge Christopher Sontchi had expressed concerns about the company's bankruptcy plans at a hearing earlier in May. Sontchi said the changes made the documents more reasonable.
The judge also allowed $1.5 million to be set aside pay expenses of the creditors committee and to provide an initial dividend to unsecured creditors. This makes unsecured creditors able to share in any proceeds from lawsuits that might be filed later in connection to the bankruptcy.
This is the first potentially "good" thing to happen to Coda in a while. The automaker had to deal with US Worker Adjustment Retraining Notification (WARN) Act proceedings. In addition, the bankruptcy court received a filing by the automaker to "conduct a voluntary recall of Coda Sedans to replace roof-mounted side curtain airbags." Another recall had taken place last August, when Coda recalled 78 of the 100 vehicles it sold due to improper installation of side-curtain airbags.