Below is our initial take on recent bankruptcy-related developments:

Bankrupt Lordstown Motors proposes zero payment for Foxconn shares | Reuters

After successfully filing their Chapter 11 plan last week, Lordstown Motors has now proposed to pay nothing for Foxconn’s preferred equity shares. The bankrupt electric vehicle manufacturer plans to redistribute the proceeds from the sale of their assets to other shareholders if the sale generates enough funds to pay other debts.

S&K Take: The Lordstown case has provided plenty of interesting twists and turns, and this week was no exception.  Judge Walrath recently denied Foxconn’s motion to dismiss the case.  Shortly thereafter, Lordstown filed its proposed plan, which would see Foxconn’s preferred equity claims equitably subordinated.  An equity committee was also appointed in the case yesterday, as the value of the debtor’s assets looks to exceed the amount of unsecured claims, although that remains to be validated.  Deadlines in the debtor’s auction of its assets are upcoming in the next few weeks.  Quite a few recent auctions have been disappointing, although the tea leaves seem to indicate that there will be value here.  

WeWork to renegotiate most of its leases, weeks after bankruptcy warning | The Washington Post

WeWork is now working to renegotiate “nearly all” of its leases and plans close down underperforming locations in an attempt to cut their costs. In the second quarter, leasing costs made up over two-thirds of the company’s total operating expenses for 777 locations across 39 countries. 

S&K Take: WeWork has been on the restructuring profession’s radar for some time now.  The company is now implementing one of the steps in the old restructuring playbook, renegotiating lease expenditures.  Given WeWork’s business, those expenditures account for a massive chunk of the company’s operating costs.  Renegotiating leases is never an easy feat outside of bankruptcy, although given the very public going concern qualification and the likely sophistication of WeWork’s landlord base they probably know that the writing is on the wall.  That doesn’t mean that they will cut deals, but it is worth a try.  Worst case WeWork picks up the negotiations again in bankruptcy when it has the right to reject those leases. 

Party City set to exit bankruptcy with $1 billion debt reduction | Reuters

On Wednesday, Party City Holdco’s Chapter 11 bankruptcy plan was approved by a U.S. bankruptcy judge allowing the company to retain thousands of jobs and its remaining stores. The deal will cancel nearly $1 billion in company debt and allow Party City to exit bankruptcy with a $562 million loan backed by current lenders. 

S&K Take: Party City confirmed its plan of reorganization which will see the chain continue under new ownership.  The plan provided for an equitization of the company’s secured debt.  Unsecured creditors get a couple ($3.5 million) in cash plus the proceeds of the company’s Visa/MC litigation rights, which are estimated at another $5 million.  Current equity is clearly wiped out.  The company will be recapitalized with a $560+ million exit facility, and will look to raise another $75 million in equity.  On its face, the result looks like a reasonable one.  We have recently seen assumptions underlying a plan collapse quickly (e.g., Mallinckrodt), so one never knows, but hopefully this one is a success story for the business. 

Cyber Company IronNet Furloughs Workers, Explores Bankruptcy | MSN

Cybersecurity company IronNet is now exploring bankruptcy options after a recent SEC filing with plans to scale back operations and to furlough most of its workers. 

S&K Take: I am sure this name isn’t new to many in the restructuring world, but it is the first time we are covering it in these pages. IronNet is a cyber security firm headed by some former NSA heavyweights.  The company has furloughed its employees and conceded that they can’t really afford to pay their debts as they come due.  That typically is a prelude to a bankruptcy filing, but maybe this one is different!  The company is another de-SPAC story, and recently attempted to implement several last-gasp efforts to right the ship. Doesn’t seem like those efforts have succeeded.  Will keep an eye on this, which looks to be a likely candidate for a filing and a quick 363 sale process.