Yahoo Finance Arrival: The full story of how a £9bn electric vehicle firm collapsed into administration
The full story of how the UK businesses of electric vehicle company Arrival collapsed into administration owing more than £1bn has been revealed for the first time.
Founded by a Russian billionaire in 2015, the group was valued at £9bn in 2021, listed on the Nasdaq and had its UK headquarters in Oxfordshire.
However, faced with its share price plummeting by more than 95 per cent in the last year, the group cut 800 jobs and entered in a series of talks in order to secure new funding.
But with no deal reaching fruition, EY was appointed to oversee the administration process of both Arrival UK and Arrival Automotive UK in February this year.
Now, a newly-filed document with Companies House by EY has revealed how the companies entered administration and how much they owed to their creditors.
Background
Arrival UK and Arrival Automotive UK were set up in 2015 and 2019, respectively, by Russian billionaire Deni Sverdlov and are owned by Arrival SA, which is registered in Luxembourg and has been listed on the Nasdaq.
The companies set out to develop a range of commercial electric vehicles using flexible and sustainable manufacturing methods.
In response to “a challenging capital markets environment” it was announced in 2023 that production would be focused on the ‘XL Van’, to be sold in the US. It also slashed around 800 jobs.
However, by the time EY was appointed, production had not started.
Arrival UK holds the companies’ IP for the design of electric vehicles and conducted the majority of the research and development functions. The group invested more than $1.5bn (£1.2bn) in R&D prior to administration.
It also holds the shares for the material subsidiaries within the group – namely Arrival Elements BV, Arrival Germany GmbH, UAB Arrival LT, Arrival R and Arrival Vault US.
Arrival Automotive UK carried out manufacturing for the companies and owned the associated equipment, leasing two micro factories in Oxfordshire.
The businesses were headquartered in Banbury and had a leasehold estate of nine sites across the UK, collectively employing 170 people.
According to EY’s document, Arrival UK made an operating loss of £562.3m in 2022 and £107m in 2023.
Arrival Automotive UK’s operating losses totalled £60.7m in 2022 and £6.8m in 2023. Both firms were pre-revenue.
Why did the companies enter administration?
In its document, EY said: “As a pre-productive/pre-revenue business, the Arrival Group was reliant on funding from investors to design/develop its products, with funding being raised in several approaches, including from equity from the public market and by issuing unsecured convertible bonds.
“Faced with increasing challenging market and macroeconomic conditions, resulting in delays in getting its products to market, the Arrival Group took several actions in early 2023 to reduce its operating expenditures and to seek further investment to address the Arrival group’s funding requirement.”
In January 2023 the group reduced its global workforce by around 50 per cent while it agreed to merge with NYSE-listed SPAC (special purpose acquisition company), Kensington, a few months later.
However, EY said that Arrival Group was unable to provide audited accounts for the prior financial year during the due diligence process and the deal was terminated in July 2023.
A month later, Arrival Group entered negotiations with a “strategic financial partner” to pursue a potential transaction but the talks concluded unsuccessfully.
A renewed sale process was started in October last year with Jefferies in New York, with 114 parties contacted.
The following month, around $33m (£26m) was secured to maintain operations while a sale of the group was pursued. A condition of the funding was that binding offers were to be received by the end of 2023.
EY added: “While the ongoing Jefferies marketing process did result in a number of parties expressing an interest, none resulted in an executable transaction capable of resolving the group’s liquidity problems prior to the commencement of the administrations.
However, a sale of Arrival Automotive UK’s autonomous mobile robot assets to a “global automotive supplier” for around $10m (£8m) was completed shortly before EY’s appointment.
EY was appointed after the group “faced increasing creditor pressure” culminating in a winding up petition by a supplier in relation to outstanding debts of around €1.5m (£1.3m).
What happened next?
When EY was appointed, 34 employees at Arrival UK and three at Arrival Automotive UK were made redundant for “economic, technical and organisational reasons”.
The firm added that just under 150 people are still employed by the two companies following a number of resignations.
A new sales process was launched with more than 100 potentially interested parties contacted.
EY said that negotiations with “selected parties” are continuing “with the focus on seeking to complete a transaction in the coming weeks”.
Arrival UK continues to maintain its main Banbury headquarters, but the surrender of leases has been offered to the landlords of five of its sites.
What did the companies owe?
EY said: “With regard to both companies, we would comment that whilst a process to sell the companies’ business is ongoing, a number of the estimated asset values have yet to be determined and may be lower or higher than indicated.
“Similarly, a number of creditor claims have yet to be quantified and may be higher or lower than indicated.”
According to the document, £87.3m was owed to secured creditors as of February 5, 2024, while £1bn was owed to shareholders.
Claims from employees are estimated to be £378,000 for Arrival UK and £32,000 for Arrival Automotive UK.
Arrival UK is also said to owe HMRC £1.6m, and Arrival Automotive UK owes £121,000.
EY added that non-preferential unsecured creditors are estimated to be owed in the region of £102.9m by Arrival UK and £23.1m by Arrival Automotive UK.
The firm said the final totals will not be known until all claims have been received.
