Lordstown Motors receives confirmation of Chapter 11 plan

By Sarah Lizee

Olympia, Wash., March 7 – Lordstown Motors Corp. received confirmation of its Chapter 11 plan on Wednesday, according to an order filed with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company amended the plan recently to incorporate a settlement resolving claims against the debtors and some of their directors and officers asserted in a securities class action in Ohio.

The plan preserves retained causes of action, including against Hon Hai Technology Group (Foxconn), to be pursued by the post-effective date debtors or the litigation trustee.

The plan requires that the company establish a reserve for allowed and disputed claims of general unsecured creditors, inclusive of $3 million the company would be required to pay into escrow on the effective date for the cash portion of the Ohio securities litigation settlement.

The aim of the claims reserve is to facilitate payment in full, with interest, of general unsecured creditors’ allowed claims.

The initial amount of the claims reserve is $45 million, as agreed upon by the official committee of equity security holders and the official unsecured creditors’ committee.

Holders of allowed administrative claims, allowed priority tax claims, and allowed other priority claims are to be paid in full in cash before other payments can be made.

Holders of allowed secured claims would either retain the liens on the collateral, be paid in full in cash, or receive the collateral securing their claims.

Holders of general unsecured claims will receive a pro rata share of the debtors’ cash after all administrative claims, priority tax claims, other priority claims, and secured claims are satisfied, and the professional fee escrow account is funded.

If the debtors have sufficient cash on hand to pay all general unsecured claims plus interest in full, then the holders of general unsecured claims will also receive post-petition interest on their claim amount at the federal judgment rate. If not, then the general unsecured claimholders would receive their pro rata share of any post-petition interest that can be paid.

Intercompany claims are to be reinstated under the plan.

Allowed Foxconn preferred stock interests are to be reinstated, which includes that all outstanding shares of the company’s series A convertible preferred stock, with $0.0001 par value per share to remain outstanding.

In the event any distribution is to be made to holders of allowed Foxconn preferred stock interests, the distribution would be from cash remaining after the payment or reserving for the treatment under the plan of higher-priority claims.

Common stock interests will be retained.

Allowed claims against the debtors on the same or similar basis as those set forth in the putative securities class action filed against the debtors’ current chief executive officer Edward Hightower, chief financial officer Adam Kroll and executive chairman Daniel Ninivaggi in the U.S. District Court for the Northern District of Ohio by Bandol Lim, individually and on behalf of other stockholders may recover solely from available insurance coverage.

The Lordstown, Ohio-based electric vehicle maker filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on June 27, 2023 under case number 23-10831.

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