Eclipse filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware Nov. 25, 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. At the same time, the company sent letters to some of its customers outlining immediate consequences of the sale, including denial of warranty claims, an end to the JetComplete support program, and the likelihood that those who have made deposits or requested refunds will lose their money.
ETIRC Aviation, a principal driver of the very-light-jet 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 Pieper. “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.”
Making sense of the Eclipse drama by AOPA Pilot Editor in Chief, Thomas B. Haines
Eclipse Aviation is also 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.
Also announced on Nov. 25, 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.
However, some Eclipse customers received a letter Nov. 25 from the company outlining how different customer groups will be affected by the reorganization and sale. The letters advise those who have placed deposits on aircraft or requested refunds that they are unsecured creditors of the company and it will be up to the new company to determine whether or not to honor those obligations. In addition, warranty claims will not be honored, and Eclipse will void contracts for its JetComplete program, which allowed operators to purchase packaged aircraft management and support services such as scheduling routine maintenance, updating navigation system databases, and assistance with filing flight plans and aggregating weather information.
New York-based Greenhill and Co., Inc., an independent investment bank with 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 [email protected].
Peg Billson, president and general manager of the Eclipse Aircraft Manufacturing Division, has resigned from Eclipse Aviation as the company heads into Chapter 11 bankruptcy protection.
Billson figured prominently in a House aviation subcommittee hearing earlier this year on the certification of the Eclipse 500. FAA employees testified they were pressured to approve certification before they thought the aircraft was ready.
Billson said concerns about the Eclipse certification were based on misstatements, misconceptions, and misunderstandings. Billson told the committee that she did work her way up the levels of the FAA to obtain clarity on the production certification process and asked FAA headquarters for assistance. She did admit to twice providing the FAA with an “immature” airplane that did not meet certification standards
“We had some false starts,” she said.