3 Objections Stall Hearing on Lordstown Motors Chapter 11 Exit

LORDSTOWN, Ohio – Lawyers representing parties in the Lordstown Motors Corp. Chapter 11 bankruptcy case negotiated for seven hours Wednesday to resolve outstanding issues that block a consensual resolution of the failed EV maker’s reorganization plan.

“We’ve been together all day in a conference room in an attempt to make the planned confirmation as consensual as possible,” attorney David M. Turetsky told Judge Mary F. Walrath at the start of a 3 p.m. hearing.

“I’m optimistic,” he said. “Debtors and parties [to the case] have made significant progress.”

Still, three issues remained – and they are significant. Each deals with shares of Lordstown Motors and the legality of how executives and directors solicited shareholders and operated the company.

Topping the list, at least in terms of headline value, is the $45 million claim by the U.S. Securities and Exchange Commission, related to “monetary remedies for violations of federal securities law,” which Lordstown disclosed in a regulatory filing Tuesday.

The SEC earlier told the court that its “staff has engaged in numerous discussions with the debtors, creditors’ committee, equity committee and other constituencies to resolve [confirmation] plan issues in this case.”

The SEC wants to be able to pursue charges of securities violations, if warranted, against Lordstown Motors and its executives, and not be restricted by legal discharges that would be confirmed in the reorganization plan.

Likewise, the lead plaintiff in the Ohio Securities Class Action lawsuit has opposed the reorganization plan at every stage in the case.

And Lordstown Motors and Foxconn remain at odds over a related fraud complaint that Lordstown filed the same day it entered Chapter 11. Foxconn has also asked the bankruptcy court to convert the Chapter 11 to liquidation.

Walrath initially continued the hearing until Feb. 22, which prompted Matthew Altman, representing the Official Committee of Equity Security Holders, to seek permission to speak.

“Good momentum and a lot of dealmaking has been done,” he said. “Everybody has to go back to their clients, obviously. But it’s been a good day.”

Altman reminded the judge of the old adage, in his words: “If you expand the amount of time to do the task, the work will expand. … The work product doesn’t get better,” he said. “Sometimes mischief gets into it.”

Walrath told the attorneys to agree on a confirmation hearing date, possibly as soon as Jan. 25, and notify the court.

“I order you all to stay in that conference room a little longer to resolve everything,” she said.

Her humor – and advisory – were both apparent. Ten minutes or so after the hearing began, it was adjourned.

Copyright 2024 The Business Journal, Youngstown, Ohio.