Eclipse files for bankruptcy protection


#1

ALBUQUERQUE (KRQE) - Troubled Eclipse Aviation has filed for Chapter 11 bankruptcy protection to help it restructure under the U.S. bankruptcy code.

The filing, announced Tuesday, will give the Albuquerque-based company some temporary relief from its creditors.

According to a news release, the company plans to sell its assets to an affiliate of ETIRC Aviation of Luxembourg, which is currently Eclipse’s largest shareholder.

The sale is subject to a public auction, which is expected to complete in January.

Until then, the company will operate with the help of financing from a group of shareholders and note holders.

It has been facing numerous financial pressures. Earlier this month, the company had to secure a round of financing in order to make payroll for its employees, and faces a dozen lawsuits from customers seeking more than $7 million in refunds after the company raised the price of its Eclipse 500 very light jet in June.


#2

Aero-News Network story


#3

Squawked too.


#4

Eclipse Aviation Seeks Court Approval for Restructuring under 363 Sale
Procedures and Debtor in Possession Financing

Affiliate of ETIRC Aviation, VLJ maker’s largest shareholder, announces
offer to purchase Eclipse

ALBUQUERQUE, NM - November 25, 2008 - Eclipse Aviation®, manufacturer
of the world’s first very light jet (VLJ), announced today that it is
seeking court approval for debtor-in-possession (DIP) financing and
procedures for the sale of substantially all of its assets under Section
363 of the U.S. Bankruptcy Code. The proposed sale will enable the
business to continue as an industry leader in the manufacture and sale
of VLJs with lower costs and reduced debt liabilities.

Eclipse filed for Chapter 11 protection in U.S. Bankruptcy Court in
Delaware this morning, simultaneously announcing an agreement for the
sale of its assets for a combination of cash, equity and debt to an
affiliate of ETIRC Aviation S.a.r.l., Luxembourg, subject to higher and
better offers. ETIRC Aviation, a principal driver of the VLJ industry
in Europe, is currently Eclipse’s largest shareholder. ETIRC Aviation’s
Chairman Roel Pieper has been the acting CEO of Eclipse since July 2008
and has served as Eclipse’s Chairman since January 2008. The proposed
sale is subject to competitive bidding through a public auction, which
is expected to be completed and a sale finalized in January 2009.

“In the face of unprecedented economic challenges, it is clear that the
sale of the Eclipse business through the Chapter 11 process is the right
course of action to maximize the value of the business, secure its
future and protect the best interests of Eclipse’s stakeholders,
including customers, suppliers, employees and creditors,” said Roel
Pieper, CEO of Eclipse Aviation. “The successful sale will position the
business for aggressive global expansion, allowing the company to
fulfill its promise and solidify its position as the world’s leading
manufacturer of VLJs.”

Also announced today, a group of existing Eclipse shareholders and note
holders will provide Eclipse with post-petition, debtor-in-possession
(DIP) financing. This financing will provide Eclipse with sufficient
resources to continue normal business operations through the closing of
the sale. Eclipse has filed a motion with the Court to approve the
financing with a request for an expedited hearing to avoid business
interruption. Once approved, this financing along with other relief
requested from the Court, will position Eclipse to pay wages and
salaries, honor employee benefits, service customer aircraft and
continue manufacturing operations throughout the sale period.

New York-based Greenhill & Co., Inc., a leading independent investment
bank with proven expertise in mergers, acquisitions and restructurings,
has been retained as financial advisor to Eclipse Aviation. Inquiries
into the Eclipse Aviation sale process can be directed to Brad Robins,
Greenhill & Co., Inc. at 212-389-1567 or brobins@greenhill.com.


#5

The 11th Chapter
Filing details, thanks to Dave:-

Eclipse Aviation Corporation
and
Pronto Aircraft Corporation
of
2503 Clark Carr Loop, SE
Albuquerque, NM
a Corporation (including LLC and LLP)
Petition for Chapter 11

Estimated number of creditors, between 5,001 and 10,000
Estimated Assets, between $100,000,001 and $500 million
Estimated Liabilities (consolidated, book value), more than $1 billion

The petition is signed by Roel Peiper as CEO and dated today, 25th November 2008

Other details from the form include:-

  1. There is a bankruptcy case concerning debtor’s affiliate, general partner, or partnership pending in the District (Delaware)
  2. The lawyers are Young Conaway Stargett & Taylor LLP of Wilmington DE.
  3. The largest creditor, listed at $92.3 million, is Kings Road Investments Ltd. of Madision Ave. New York.
  4. The total amount owed to bond holders (including Kings Road) is listed at $494.9 million.
  5. The total amount owed to larger trade creditors ($2 million plus) is listed at $164.8 million.
  6. The total amount owed to customers ($2 million plus) is listed at $29.7 million.

That’s the ‘topline’ information, which I post to advise the widest possible audience.

Peg has left, and ETRIC have made the first bid to purchase the assets. The sale will need to complete in January of 2009, subject to other, higher bids. I’m sure we’ll find out what ETRIC have offered, and where the funds are coming from to support the bid.

Al Mann and ETRIC have provided DIP (Debtor in Possession) financing of $12 million, with a facility up to $20 million.

The ‘top three’ for bond holders, trade creditors and customers (expressed in millions) are as follows:-
Bond holders

  1. Kings Road Investments of Madison Ave New York for $92.3
  2. KBK Master Fund of Crescent Court, Dallas for $84.9
  3. Citadel Horizons of South Dearborn, Chicago for $53.4
    Trade Creditors
  4. Fuji Heavy Industries, Tochigi-ken, Japan for $31.8
  5. Hampson Aerospace, Grand Prairie, Texas for $31.3, although we know the history here.
  6. Pratt & Whitney Canada, Quebec, for $30.1
    Customers
  7. DayJet, Boca Raton, for $6.2, even though we’ll never get to the bottom of this…
  8. ATASAY-MyJet Aviation, Turkey, for $5.0
  9. Triac, Nicosia, Cyprus for $4.3
    Sundry amounts (above $2 million)
  10. UT Finance, East Hart, CT, for $13.5 million, which is linked to DayJet
  11. Irell & Manella LLP, Avenue of the Stars, Los Angeles, for $3.2 million of ‘legal services’

Grand total
$706.1 million, and counting. Clearly there is a lot more to uncover. But it’s a start.

Information from Eclipse Blog


#6

Aero-News Network update


#7

It’s not all that suprising. They were not paying their suppliers or creditors. It was only a matter of time. At least its not chapter 7 though.


#8

I’m guessing that the design and assets will be sold to a new/different company that won’t have to pay back or support all the development costs.

Thus is the common tale of small/new companies that do innovative, but expensive, things.


#9

Eclipse Blog

So let’s tally the ‘good vibes’
It’s possible that Roel Peipers’ plan might work, leading to a restart of production in ABQ in the early part of 2009. But only IF his plans get past the bankruptcy judge AND the key suppliers stay on board. He also needs to prove there are enough orders at what will clearly need to be an even higher list price and finally, he has to avoid someone else putting in a spoiler bid. It’s possible that one of the existing vendors might do a ‘Beech Starship’ and simply close the whole show down in an effort to avoid future liabilities. And don’t forget, Wedge is lurking. If he won the bidding auction in January this would surely destroy whatever remains of the ‘goodwill’ stakeholders still have in the project.

The ‘mythical’ s/n 266
On the 26th of July 2008, an ‘Experimental CoA’ was issued to EAC for this aircraft. This was well out of sequence. For example, the ‘last’ FPJ (delivered on the 21st of November) was s/n 259 and that only appeared on the FAA database for the first time on the 18th of August. The importance attached to ‘266’ is twofold. First, it’s been used by EAC to show off the ‘final’ configuration to customers and suppliers in a effort to drum up support. Second, as the self declared first ‘completed’ aircraft it was going to be the benchmark for all upgrades as well as the reference configuration for all future production. What will happen to this orphan now? Will it be dumbed down to lower people’s expectations, or simply vanish in the fog of war created by Chapter 11? I suspect we will be ‘surprised’ by it’s departure to ‘Russia’ in the near future…


#10

Why don’t they get a bail out?