Beleaguered electric vehicle startup Faraday Future is restructuring in order to survive. The company announced a new deal on Monday that could chart a path forward. The startup has been without a main financial backer for months, is unable to bring back hundreds of employees still on unpaid leave, and recently sold its own headquarters to generate cash. But its new path, financial experts tell The Verge, resembles an out-of-court bankruptcy.

The would-be automaker announced that Chicago-based Birch Lake Associates will provide the startup with bridge financing, or a short-term loan, of “up to $225 million.” Of that potential total, $75 million will come in the form of “senior secured” debt financing, meaning the loan from Birch Lake must be paid back before any other suppliers or contractors receive money owed by Faraday Future.

Many are waiting, too. As of October, Faraday Future still owed “more than $59 million” to outside vendors, according to court documents uncovered by The Verge. At least 11 have sued Faraday Future (for a total of nearly $80 million in past due pay) since the startup laid off and furloughed hundreds of employees last October during a nasty split with its main financial backer, Chinese conglomerate Evergrande.

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To alleviate their pain, Faraday Future and Birch Lake say the remainder of the $225 million announcement will come in the form of a “vendor trust” of “up to $150 million.” The EV startup says Birch Lake started this trust with an undisclosed amount of financing that will help Faraday Future pay “all past due amounts for approximately 60 percent of FF’s vendor base, including smaller vendors who are owed less than $20,000.”

Larger suppliers, meanwhile, will have to exchange claims on the debt they’re owed for bigger slices of the trust, which will be paid out across 2019, according to the press release.

Faraday Future is doing the “equivalent to what might happen in bankruptcy”

Viewed together, these steps (including the dizzying language of that last one) spell out the “equivalent to what might happen in bankruptcy,” according to Jared Ellias, associate professor at the UC Hastings College of the Law in San Francisco. Frederick Tung, a professor at the Boston University School of Law, agreed, calling it “essentially a financial restructuring” in an email to The Verge.

Ellias says he isn’t surprised that Faraday Future is now on this path, because Birch Lake’s CEO Jack Butler “is a bankruptcy legend.” Butler co-founded the restructuring division at international law firm Skadden Arps, and so Ellias says “it’s not surprising that a bankruptcy person sees a bankruptcy-type solution to what was wrong” with Faraday Future.

Ellias also says this out-of-court restructuring is “a logical solution” considering the position Faraday Future is in, and that doing it a step removed from bankruptcy law could theoretically save the startup tens of millions of dollars in lawyers’ fees.

In exchange for the “up to $225 million” in loans from Birch Lake, Faraday Future has offered up all its “assets and all proceeds thereof,” according to new financing statements filed with the California secretary of state. That includes the 900 acres in Las Vegas, Nevada where Faraday Future once planned to build a $1 billion factory. The startup recently put that land up for sale (with an asking price of $40 million), as The Verge first reported in February. But a new document filed with the Clark County Recorder’s Office shows the deed to the Las Vegas land was transferred to Birch Lake on April 29th.

The short-term loans from Birch Lake are supposed to give Faraday Future a chance to “get its act together sufficiently” enough to “convince equity investors that the company will survive,” Tung says. And Faraday Future is planning to raise capital, according to Monday’s announcement.

Faraday Future aims to raise $1.25 billion, meaning one of its few shareholders will have to sell a big stake

Based on a $1.25 billion valuation of the company’s intellectual property by investment bank Houlihan Lokey (which Ellias points out is also well-known for restructuring businesses), Faraday Future said it hopes to raise the same amount ($1.25 billion) to move forward in trying to get its first electric car into production. The company had previously claimed in internal meetings that it needs at least $500 million to enter production, sources told The Verge.

To raise that much money, Ellias says, Faraday Future would likely have to sell a massive stake in the startup. The question now is who will get bought out. Founder and CEO Jia Yueting owns at least 33 percent of Faraday Future, though he has been reluctant to sell his stake out of fear of losing control of the company, multiple sources have previously told The Verge. In fact, when former CFO Stefan Krause attempted to lead the company into bankruptcy to save it from collapse in 2017, Jia refused and fired him out of fear of losing control, sources told The Verge at the time.

Evergrande, the massive Chinese conglomerate that invested $800 million in Faraday Future in late 2017, still owns a 32 percent stake in Faraday Future — even after breaking up with the EV startup late last year. It would cost $600 million to buy out Evergrande’s stake according to filings with the Hong Kong Stock Exchange, though that price increases every year for five years, with the maximum payout totaling $1.05 billion if Jia waits until 2023. (Evergrande initially got 45 percent of Faraday Future in return for its investment in 2017. It’s unclear what happened to the 13 percent difference when the conglomerate reduced its stake at the end of 2018. The remaining shares are held by employees.)

A few hundred employees remain, but many crucial to the development of the FF91 are gone

Founded in 2014, Faraday Future once boasted nearly 1,500 employees, many of whom were hired away from the likes of Tesla, Apple, and major automakers. Its goal was to build an all-electric car called the FF91 that would be faster than a Tesla, and decked out in all sorts of high technology, for which it secured hundreds of patents. The company still hopes to build the FF91 in a retrofitted tire factory in Hanford, California, and says it could deliver the car in 2020. It also recently announced aspirations to build an electric minivan in China in partnership with a mobile gaming company.

But in the cash-strapped aftermath of the split with Evergrande, the startup now has fewer than 400 people working on reduced payroll in the US through the furlough, according to one current employee. It has lost many key employees, too. Two of its three co-founders have resigned in the last year and a half, as have many of its top executives. The company also recently lost a number of employees who were crucial to the development of the GM EV1 — considered to be the first mass-produced electric car — to rival EV startup Rivian.