Hearings Start Today in Lordstown Motors’ Bankruptcy
LORDSTOWN, Ohio – A court hearing on first day motions is set for today regarding electric-vehicle startup Lordstown Motors Corp.’s petition for bankruptcy protection, according to the latest filings.
A notice filed Tuesday afternoon in the United States Bankruptcy Court for the District of Delaware has scheduled a hearing on first day motions for 3 p.m. before Judge Mary F. Walrath.
The hearing will consider matters such as motions related to prepetition wages and compensation, employee benefits and incentive programs, continuation of health insurance plans and other obligations during the normal course of business, documents say.
Lordstown Motors filed for Chapter 11 bankruptcy early Tuesday, citing an ongoing dispute with development partner Foxconn as the major cause. The company has also filed a lawsuit against Foxconn, alleging Foxconn acquired Lordstown Motors’ assets under false pretenses and failed to fulfill its obligations related to an investment agreement the parties signed in November 2022.
According to court filings Tuesday, Lordstown Motors says it wants to use bankruptcy as a means to sell its assets.
“The debtors have filed these chapter 11 cases for the purpose of using the tools of the bankruptcy code to maximize value in the face of Foxconn’s ongoing and repeated breaches of its commitments to the company,” documents say.
“In this regard, the debtors are initiating a timely and efficient chapter 11 marketing and sale process to pursue and consummate a value-maximizing sale of their assets for the benefit of all stakeholders,” according to the filing.
The company has proposed investment banker and financial advisor Jefferies LLC to market and arrange a sale of Lordstown Motors.
“The debtors, with the assistance of Jefferies, have developed a list of parties whom they believe may be interested in, and whom, the debtors reasonably believe would have the financial resources to consummate a sale,” court papers say. “The list of parties includes both strategic and financial investors.”
Lordstown Motors is seeking court approval of a bid process and to conduct an auction of substantially all of the company’s assets, documents say.
The company filed a lawsuit in bankruptcy court against Foxconn alleging breach of contract, tortious interference with a contract and common law fraud. The complaint claims Foxconn has repeatedly delayed and sabotaged a partnership the parties established in May 2022.
The partnership included Foxconn’s acquisition of Lordstown Motors’ manufacturing plant for $230 million, a contract manufacturing agreement to produce the Lordstown Endurance electric pickup truck and a joint venture agreement to collaborate on future EV products.
The JV was modified in November as a direct investment agreement, in which Foxconn would purchase up to $170 million in common and preferred stock in the company. That month, Foxconn closed an equity purchase of $52.7 million.
However, Foxconn has not completed a second round of funding totaling $47 million per the agreement, citing that Lordstown Motors is in violation of the deal since it received a delisting notice from Nasdaq in April.
Lordstown Motors said in its lawsuit that the delays have cost the company customers, leading to the bankruptcy. The company also accused Foxconn of using the agreements as “instruments by which Foxconn perpetuated its broader scheme to loot plaintiffs of their most valuable assets,” according to court documents.
Foxconn responded by calling the allegations “malicious” and false, threatening legal action of its own.
“Regarding LMC’s litigation announcement today and the false comments and malicious attacks made by LMC in its external statements against Foxconn, the company reserves the right to pursue legal actions and also suspends subsequent good faith negotiations,” Foxconn said. “Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus.”
RELATED COVERAGE:
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Affidavit: Foxconn’s Actions ‘Destroyed’ Lordstown Motors; Foxconn Responds
Lordstown Motors Files Chapter 11, Sues Foxconn for Fraud
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