Lordstown Motors Says 13 Potential Bidders Looking at Its Assets
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 Thursday.
“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,” Lauria said.
“The real difference maker here is the ability to use Chapter 11 to get to the finish line quickly,” he said. “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.
Lauria proceeded to recite the many steps that have since been taken to make the 13 entities that have expressed interest in Lordstown aware of Karma’s claim.
“I agree with Karma that the debtor cannot sell something that the debtor cannot establish is its property. … It’s critical to have that issue decided,” she ruled.
As Lauria conceded, “If Karma prevails, such an outcome could have an impact on the assets for sale.”
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 to the court 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 sale.
Lauria told Walrath he would “like to have a date [for a final sale hearing] that we can be working toward. … It helps with the bidders to have a deadline,” he said.
“I’m prepared to stipulate on the record that we will not use the sale process in any way to end-run the Karma litigation. … If we reach the point where we have a proposal [that needs to sort out the issue], we’ll figure it out without coming to the court,” he said.
“Things change. This court has seen situations where enemies become friends,” Lauria said.
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.
Walrath tentatively set Oct. 5 – about the time when the outcome of the Karma case should be known – for the final sale hearing and asked the lawyers for all parties to get together and agree on deadlines for all bids and any objections.
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Pictured at top: The Endurance prototype comes off the Lordstown assembly line, which has ceased operations.
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