Eclipse offers payment plan to raise capital

Eclipse offers payment plan to raise capital

By Thomas B. Haines

In a letter to customers this week, Eclipse Aviation made an offer that will save some of its position holders as much as $509,000 and at the same time raise capital for the company as it struggles to maintain cash flows while it ramps up production of the Eclipse 500 very light jet.

CEO Vern Raburn said the company expects to close another round of financing in the next 120 days, but is offering a special incentive to position holders to pay a deposit early in exchange for a guarantee of no more inflation adjustments and potentially a lower price. The deal will raise potentially $30 million for Eclipse between now and Dec. 14 without requiring the company to give up any more equity.

Position holders must agree to pay $625,000 by Dec. 14 in addition to any deposits already paid. For that they can get their base model Eclipse 500 for $1.25 million with no inflation adjustments through the time of delivery. Currently, position holders are subject to annual price increases based on CPI adjustments. Those saving the most under the plan are those who placed orders recently, when they would have paid $1.595 million and will face adjustments into 2010 when their deliveries are scheduled.

Through the new lower fixed price, they could save more than $500,000. Those placing new orders can also qualify, but their aircraft price is $1.4 million and they must pay the $625,000 up front instead of the usual 10 percent deposit or $140,000. The offer will be limited to about the first 50 customers who take advantage of it, according to Raburn.

He said the future cash flows will not be significantly impacted by the early infusion of deposits because the 50 orders is a relatively small percentage of the number of airplanes they plan to build over the next three years. Eclipse will place the additional deposits into an escrow account until $30 million is raised, at which point the funds will be used by Eclipse in its operations.

Raburn scoffed at claims by critics that the company is in desperate financial straits. "We have other options for raising capital," he said, acknowledging that additional funding is necessary because the production ramp up has been slower than anticipated and the company needs to build airplanes in volume to be profitable. "They're making it up. They're plain, flat liars, really," he admonished, noting that as a private company no one on the outside has access to the company's financial data.

Raburn said the incentive is a way to raise capital and to reward customers who have stuck with the company even as it has missed key milestones during development of the airplane.

November 28, 2007