Lordstown Motors Again Amends Chapter 11 Plans, Settles Issue with Foxconn
LORDSTOWN, Ohio – Lordstown Motors Corp. has resolved some key objections in its newly modified amended Chapter 11 reorganization and disclosure plans, including how the $30 million in preferred shares owned by Foxconn will be handled.
Therefore, a slimmed-down hearing agenda will be heard Tuesday in U.S. Bankruptcy Court in Delaware on the new disclosure plan filed Sunday by Lordstown Motors.
A hearing on the new reorganization plan will wait for another day.
At a status conference Oct. 25, attorneys for Lordstown Motors told Judge Mary F. Walrath that they “would continue to work with parties to try to resolve objections and narrow any issues before the court.”
Lawyers successfully negotiated the objection raised by the U.S. Trustee regarding the “consensual nature of the third-party releases,” court papers say. “Certain clarifying changes” also were made to the modified plans to address the treatment of the 300,000 preferred shares of Lordstown Motors owned by Foxconn.
Lordstown Motors had sought to “impair and equitably subordinate the Foxconn Preferred Interests,” court papers say. The newly amended disclosure plan reinstates Foxconn’s interests, giving the company the same rights that it had before the bankruptcy filing – and the same rights retained by the owners of 15.9 million shares of common stock.
“This change, along with certain clarifying changes reflected in the modified amended plan and the modified amended disclosure statement resolves Foxconn’s disclosure statement objection,” lawyers state in court papers.
As for other objections, including one filed by the U.S. Securities and Exchange Commission, which is investigating potential securities fraud by previous owners and directors, Lordstown Motors is asking Judge Walrath to deny all of them. That denial would include objections filed by the plaintiffs in the myriad lawsuits that accuse past owners and directors of securities fraud.
“Among the most significant modifications [in the modified amended plans] is the revised classification and treatment of claims and interests,” Lordstown Motors states. “Unsecured creditors now occupy a single class” in the payment schedule – and will receive 100% of what they are owed. Separate classes have been established for the securities fraud lawsuits, which would determine the pool of money they might share.
While Lordstown Motors and Foxconn have resolved issues related to Foxconn’s preferred shares, Lordstown Motors says it “intend[s] to vigorously prosecute the Foxconn adversary proceeding. That lawsuit, filed June 27 as a companion claim to the bankruptcy petition, claims Foxconn sabotaged Lordstown Motors to strip its assets and poach its talent.
In response, Foxconn asserts that Lordstown Motors was a failed EV startup long before it entered the picture.
On Oct. 27, Lordstown Motors and Steve Burns, founder and former CEO of the EV startup, and his new company, LAS Capital LLC, closed the $10.2 million purchase of the company’s assets.
The acquired assets, assigned to LAS Capital’s affiliate, LandX Motors Inc., are described by Lordstown Motors as “related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assumed certain specified liabilities.”
Copyright 2023 The Business Journal, Youngstown, Ohio.