(Bloomberg) -- Fair Financial Corp., a startup car-leasing company backed by SoftBank Group Corp.’s Vision Fund, is preparing a bankruptcy restructuring filing, potentially wiping out equity investors, according to people familiar with the matter.  

In one scenario under consideration, SoftBank, which holds a third of equity and serves as the senior secured lender of Fair's debt, would retain control of the company through a bankruptcy filing. Fair, which is based in Santa Monica, California, had raised about $450 million in equity and $500 million in debt, $315 million of which is owed to SoftBank and is past due. Equity investors would lose their stakes should courts approve a restructuring plan, said the people, who requested anonymity to discuss a private matter.

The filing is one of several options being explored and isn’t finalized, said Chief Executive Officer Brad Stewart, who was recruited last year to turn around a business already starting to falter. “The company’s original plan did not work,” he said in an interview. “But the company has created valuable intellectual property in the form of technology and brand that’s well suited for a strategy pivot.” Stewart said Fair could become a leasing middle-man between consumers and car dealers, without taking on the balance-sheet risk of buying cars itself. 

The company’s website no longer offers much  information beyond the message:  “A new Fair is on the way.”

A spokesman for SoftBank’s Vision Fund declined to comment.

Two years ago, the auto-leasing upstart was growing quickly, thanks in part to a partnership with Uber Technologies Inc., another SoftBank portfolio company, that let drivers easily lease cars. It was still working on how to make those leases profitable. 

SoftBank, as it has done with many other portfolio companies, encouraged Fair to spend big to build market share, such as taking on loans to buy an enormous fleet of cars to rent to customers. Colin Fan, the now departed managing partner who led the Vision Fund’s investment in the company, liked to tell executives that the biggest risk was not growing fast enough, according to one person who attended several board meetings.

When SoftBank ran into problems with another portfolio company, WeWork Cos., in 2019, the Japanese company asked many of its startups to tighten spending. Around that time, Fair founder Scott Painter was replaced with one of SoftBank’s own executives, Adam Hieber, as interim CEO. Then, Fair recruited Stewart, the former CEO of jet-rental company XO.

The company also started slashing costs, including ditching the Uber deal, selling cars and firing employees. Fair currently employs about 150 people, down from more than 900 at its peak.

SoftBank first invested in Fair in 2017, deploying $30 million from SoftBank Group and another $300 million in a round led by the Vision Fund the following year. SoftBank eventually bought Fair’s debt of around $300 million from Greensill Capital, a company in the Vision Fund’s portfolio that collapsed earlier this year.

Currently, Fair has about $170 million in assets, including $100 million in cash, said one of the people.

Venture backers include BMW i Ventures, Javelin Venture Partners and Next 47.

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