LMC Investment Banker: ‘Positive’ Response but Not ‘Optimal Time’ to Raise $450M

LORDSTOWN, Ohio – December isn’t the “optimal” time of the year to raise startup capital, but the investment banker working with Lordstown Motors Corp. says he’s seeing strong interest from around the world.

Michael Gibbons, senior managing director and principal with Brown Gibbons Lang & Co., Cleveland, is working to raise the reported $450 million the company expects it needs to retool and restart the former General Motors Lordstown plant, where it plans to manufacture its Endurance electric trucks for delivery in November 2020.

Gibbons’ firm has been out with its solicitation for a little over two weeks and response has been “positive,” he reported.

“The time of the year is not optimal. In our 30-year history, we’ve never gone out in late November,” he said.

Several potential partners have said they don’t have the “bandwidth” to address the deal now and won’t have it until early January, he continued. “People are trying to close transactions,” Gibbons said. Potential investors from around the world are showing interest, including Malaysia’s sovereign wealth fund, he affirmed.

Another possible source of financing for the project is the U.S. Department of Energy’s Advanced Technology Manufacturing Loan Program, which was launched in 2007 to reduce petroleum use in vehicles and promote domestic manufacturing.

Funding for the program had been zeroed out by the Trump administration but the House Appropriations Subcommittee on Energy and Water Development refunded the program at the urging of U.S. Rep. Tim Ryan, D-13 Ohio. Ryan said he has spoken with Lordstown Motors CEO Steve Burns about accessing the program.

“They’re very interested in taking advantage of it and working with us to get it done,” Ryan said. The company’s application will be supported by a “bipartisan letter of support” signed by Ryan and Republican U.S. Reps. Bill Johnson, Brad Wenstrup and possibly David Joyce, he said.

Also being considered are state incentives. So far, Lordstown Motors hasn’t applied for anything, said Matt Englehart, spokesman for JobsOhio. JobsOhio is the private nonprofit entity that manages the state’s economic development efforts.

Sarah Boyarko, chief operating officer of the Youngstown/Warren Regional Chamber, said she expects to meet “fairly quickly” with Lordstown Motors to discuss possible government assistance for the project. Someone from the chamber’s economic development team speaks with company representatives at least every other day, she added.

“We’re looking at having that conversation along with our local and state partners on how we can support their efforts,” Boyarko said. “We need to have a good understanding of the project parameters and what they might have need of.”

Until The Business Journal revealed Monday that GM has given Lordstown Motors a $40 million mortgage to buy and begin operations at the plant, Chamber officials did not know the degree of support that General Motors LLC was providing the startup. There were “thoughts that there would be some element of potential continuing support,” Boyarko said.

The open mortgage from GM, potentially for as much as $50 million, as well as the $20 million sale price for the plant, shows the confidence that GM has in the startup’s ownership, she said.

“It also sends a strong message to any investors that might be considering their own support that if General Motors is at the table maybe they should be too,” she continued.

The loan is good but isn’t the same as a long-term commitment or investment, U.S. Sen. Rob Portman, R-Ohio, said during a conference a call with Ohio reporters Tuesday afternoon

“It will help them get on their feet,” he said. “They are going to need some help and I’m glad they’re getting some but I wish they were getting more.”

The GM financing doesn’t really play a role in the startup’s fundraising efforts, Gibbons, the investment banker, said. The plant, on the other hand, does.

“If anything, the plant gives us standing. There’s no doubt that that puts us in a position well ahead of our competitors,” he remarked.

The plant produced 400,000 vehicles annually at it speak, and the experts that Lordstown Motors has retained believe it could produce as many as 600,000 units annually, because of efficiencies in the electric truck production process, Gibbons noted.

The investment banker also pointed out that none of Lordstown Motors’ announced competitors in the electric truck segment are targeting the identical market it is.

“We’re producing trucks for the working man,” he said. Research conducted by Ernst & Young confirms the market exists for the Endurance. “It’s hard to imagine somebody not wanting this truck.”

The firm only researched the commercial fleet market, not the consumer market, he added.

Current and former members of United Auto Workers Local 1112, which represented hourly workers at the GM Lordstown plant until it ceased production this March, were not surprised to learn of the GM loan, the local’s president, Tim O’Hara, said Tuesday.

“Most of my members are suspicious that now GM is going to end up producing cars in that plant at some point in time,” O’Hara said. GM “basically just wanted to get rid of” the plant’s incumbent employees and “start all over again.”

Though Lordstown Motors executives have said they want UAW representation at the plant, no one has reached out to the union, O’Hara said. He understands why local officials have expressed their support for the deal – for the jobs and the investment aspect.

“But they didn’t go through what we went through with General Motors,” he said.

Pictured: Lordstown Motors needs a reported $450 million to retool and restart the former General Motors Lordstown plant, where it plans to manufacture its Endurance electric trucks.

Copyright 2022 The Business Journal, Youngstown, Ohio.