Fair faces uphill battle to restructure

Fair had at one time raised more than $1 billion, Stewart said. Asked about estimates of $500 million in debt and $450 million in equity, he called the true numbers lower. Fair owes SoftBank some $315 million in senior secured debt, with some additional debt associated with unsecured liabilities, he said.

Stewart projected the company would reach a decision on resolving the company’s financial situation this fall. Fair seeks to launch its new site in the first quarter of 2022.

He estimated it could take $2 billion to $3 billion to reach scale in the leasing business “if you could.” Or Fair could switch to a matchmaker role in the fashion of Uber or Instacart. The right path was “incredibly obvious,” he said.

The old business model presented Fair with issues such as “irrationally high” customer acquisition costs and an inability to securitize the leases. Fair also had to charge an additional $75 to $100 per subscription to offset the vehicle’s depreciation, the business’ higher capital requirements and the amortization challenge posed by customers borrowing vehicles for short and often uncertain durations, he said.

Subscriptions also pose a demand and competitiveness challenge, according to Stewart. A consumer with good credit would find traditional automaker new-car leasing “extraordinarily competitive” — offering a better deal than even Fair could offer in some cases, Stewart said.

Consumers with poorer credit might find “a used-car lease makes a lot of sense,” Stewart said. But car loans generally could be “very competitive” with what Fair would charge, he said.

An opportunity for vehicle subscriptions “absolutely” existed, but compared with other loan products, “I just don’t think the market need for it is significant,” Stewart said.

Keller agreed that subscriptions weren’t competitive.

“The economics don’t work,” she said. “They never did.”

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