Eclipse Plans Reorganization Under Chapter 11
November 25, 2008 — Citing “unprecedented economic challenges,” Eclipse Aviation filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware on Tuesday, November 25. The Albuquerque manufacturer that launched the Very Light Jet (VLJ) category made the announcement just four days after announcing it had received EASA (European) certification for its model 500 Jet.
The Associated Press reports that the company plans to sell nearly all assets – valued at between $100 million and $500 million - at a public auction to be held in January while continuing to operate through a debtor-in-possession (DIP) financing arrangement. Eclipse has more than $1 billion in liabilities, according to court records.
Unless an offer comes through from a higher bidder, company assets will be sold to an affiliate of ETIRC Aviation, (EclipseJet Aviation International Inc.), Eclipse’s largest shareholder. ETIRC’s chairman, Roel Pieper, has been the acting CEO of Eclipse since July 2008. He has also served as Eclipse chairman since January 2008.
“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,” Pieper said in a news release. “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.”
In most instances under Chapter 11, a company will continue operations while seeking court protection to prevent creditors from immediately seizing company assets, thus allowing the company to reorganize and reduce its debt.
A group of existing Eclipse shareholders and note holders will provide Eclipse with post-petition, debtor-in-possession (DIP) financing to allow the company to continue normal business operations through the closing of the sale. Once approved, this financing along with other relief requested from the Court, will allow Eclipse to pay wages and benefits for its 945 employees, service customer aircraft, and continue manufacturing operations.