LORDSTOWN, Ohio — An open-end mortgage instrument filed in Trumbull County shows that Foxconn has extended up to $500 million in credit to electric-vehicle manufacturer Lordstown Motors in return for the EV startup putting its plant and land up as collateral.
The documents were filed Nov. 24 in the Trumbull County Recorder’s Office.
The agreement calls for Lordstown Motors to mortgage land, improvements, equipment, easements, fixtures and personal property in return for the financing, documents show.
However, Lordstown Motors said that such agreements aren’t unusual.
“Under Ohio law, when you record an open-ended mortgage, you need to declare a maximum amount,” spokeswoman Kimberly Spell explained. “This amount typically exceeds the amount of potential liabilities that would be secured by the mortgage.”
In November, Lordstown EV Corp. and Foxconn EV Technology Inc. announced they had signed an asset purchase agreement that calls for Foxconn to acquire Lordstown Motors’ plant, land and other assets for $230 million. In October, Foxconn made an equity investment in Lordstown Motors of $50 million at approximately $6.90 per share.
According to the purchase agreement filed with regulators, Lordstown agreed to grant Foxconn the mortgage “with respect to the repayment obligations” related to Foxconn’s down payments toward the acquisition.
Under the deal, Lordstown Motors received an initial down payment of the purchase price of $100 million on or about Nov. 18, and will receive subsequent down payments of $50 million on or about Feb. 1, 2022, and another $50 million no later than April 15, 2022, subject to certain conditions. The deal is expected to close April 30.
In exchange for the down payments, Lordstown Motors granted Foxconn the mortgage, Spell noted.
The mortgage covers the balance of the purchase price and any potential “reimbursement of certain operating and facility costs incurred from Sept. 1, 2021 through closing,” Spell said.
The mortgage agreement, however, does exclude as collateral what appears to be about 90 acres owned by Lordstown Motors that is directly west of where Ultium Cells LLC is building a $2.3 billion electric-vehicle battery plant.
Yet closing the asset purchase agreement is contingent on other factors, such as a deal that would allow Foxconn to act as a contract manufacturer for the Endurance, the all-electric pickup truck under development at Lordstown.
That agreement must be enacted before the asset purchase deal closes.
The two companies have also agreed to pursue a joint venture agreement in which they would co-design, engineer and develop vehicle programs for the commercial market in North America and internationally.
In 2019, General Motors extended a line of credit of up to $50 million to Lordstown Motors so the startup could purchase and begin retooling the Detroit automaker’s former Lordstown Complex. That $50 million, secured by a mortgage of the plant, was converted into a GM equity investment in Lordstown Motors when the company merged with DiamondPeak Holdings, a blank check firm that took Lordstown Motors public in October 2020.
GM still owns about 4.5% of Lordstown Motors stock.
Foxconn, a major electronics company traditionally known as a manufacturer of iPhones, has over the last 18 months moved into the EV market. In October, the company unveiled three EVs through its joint venture with Taiwan-based Yulon Motor Group.
Earlier this year, Foxconn struck up a partnership with Fisker Inc., which intends to produce its Pear electric vehicle at the Lordstown plant.
Meanwhile, Lordstown Motors continues to move forward with its efforts to launch the Endurance. Last month, the company said it would delay commercial production of the vehicle until the third quarter of 2022. It had earlier stated that commercial production could start during the second quarter of that year.
Lordstown Motors has said supply line disruptions and parts shortages have contributed to the delay.
The company expects to build about 100 pre-production vehicles of the Endurance over the next three months.