Argg! I missed this one pealing down the sheath and look what happened
Oh well at least there is a second growth to save
So lets peal down the sheath to save it from fermented rotting. And what about the smelly sick growth? Well peal it down as far as you can and allow to dry.
No need for fungicides.
What fungicide did you put on it? My Laelia orchid has this issue.