LORDSTOWN, Ohio – Lordstown Motors Corp. has received “expressions of interest” from 13 entities that may buy all or part of the EV company’s assets, or liquidate them, U.S. Judge Mary F. Walrath learned Aug. 3.
“Some of these proposals have big issues and problems and some are more promising,” said Thomas E. Lauria, lead attorney for Lordstown Motors.
Lauria offered no specifics during the hearing, which was conducted via Zoom. Nor did Walrath, who presides in U.S. Bankruptcy Court in Delaware, ask for details.
The hearing began with a plea by Lauria that the judge not delay the Chapter 11 asset sale process, which Lordstown Motors proposed to conclude as soon as Sept. 12. “If we were to hit the pause button now, it’s unclear how many of those proposed bidders would come back,” he said.
“The real difference maker here is the ability to use Chapter 11 to get to the finish line quickly,” Lauria continued. “This would provide benefit to everybody in the bankruptcy case, including Karma.”
Lauria was referring to the claim by Karma Automotive LLC that Lordstown Motors stole its trade secrets and poached its employees. Karma filed suit against Lordstown Motors in October 2020 and is seeking nearly $1 billion in damages.
After hearing arguments July 27, Walrath lifted the automatic bankruptcy stay on the Karma litigation and ordered Lordstown Motors to make sure all potential bidders are aware of Karma’s claim.
Karma vs. Lordstown Motors is now set for trial Sept. 12 in U.S. District Court in Central California and should take “two to three weeks to complete,” said Karma’s attorney, James Sowka. The timetable would push the jury’s decision – for or against damages and, if so, how much – to the end of September.
Lordstown Motors had proposed asset sale procedures that would set an Aug. 24 deadline for bids, an auction – if required – on Aug. 31 and a final sale hearing on or about Sept. 12.
“I’m not certain why it needs to proceed as quickly as the debtor proposes,” Walrath said. She cited the company’s unencumbered cash on hand – $136 million as of July 27 when Lordstown filed for Chapter 11 reorganization.
“It appears, given the indications of interest, the debtor has generated substantial interest in selling its assets. And I’m not prepared to put a brake on that at this time. We need to see if a stalking horse agreement can be realized,” she said.
Walrath set Aug. 24 as the deadline for Lordstown Motors to identify a stalking horse that would set the low-end bid for the assets. She tentatively set Oct. 5 for the final sale hearing and asked the lawyers to reach agreement on deadlines for bids and objections.
Earlier in the hearing, Lauria took a verbal shot at Foxconn, asserting it was the only party involved in the Lordstown Motors case that stood to gain “if the company implodes.”
Near the end of the hearing, Foxconn attorney Matthew Murphy had an opportunity to respond.
“Mr. Lauria, in his testimony, alleges that we’re trying to steal the assets or waiting to steal the assets. It’s worth noting we did not object [to Lordstown’s proposed sale procedures]. We were in discussions with Lordstown Motors Corp. [when Chapter 11 was filed]. The only race to the courthouse was by the debtor,” Murphy said.
On the same day it filed Chapter 11, Lordstown Motors sued Hon Hai Technology Group and its Foxconn affiliate for fraud.
Foxconn has not disclosed if it is interested in buying Lordstown Motors’ assets.