Eclipse Files for Chapter 11

With between $100 million and $500 million in assets and $1 billion in debt, Eclipse Aviation filed for Chapter 11 bankruptcy this morning in U.S. Bankruptcy Court in Delaware. The assets of the long-troubled company are being acquired by ETIRC, whose chair Roel Pieper, now heads Eclipse.

ETIRC is working on a Russian production line, but the legality of the technology transfer is in question. The filing comes less than a week after employees walked out when the company could not meet payroll. Related Story  “The issue of is how many avionics- and propulsion-related technologies derive themselves from the 15-year-old innovation pipeline initiated by the US Federal Government,” said Paul Masson, managing director of StarNet, LLC, which advises investors in putting money into the technology. “Two commercial technology development programs conceived in the 80's and implemented in the 90's generated a set of patents, copyrights and data-rights that provide the foundation for technologies in the VLJ industry. These programs and their legal foundation were new in the 90's and represent an unknown area of national policy and law. At the core is the issue of where the jobs related to these technologies will find a home.”
Masson assisted NASA in organizing and negotiating the legal agreements that provided the funding to develop the general aviation technologies that have been absorbed by some of the supply chain that evolved to support the VLJ industry.

Court documents show investors owed $577 million while vendors and suppliers are owed about $135 million. The company is seeking court approval for restructuring under 363 Sale Procedures of the U.S. Bankruptcy Code and Debtor in Possession (DIP) financing. 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.
Simultaneous with its Chapter 11 filing, it announced the sale of its assets for a combination of cash, equity and debt to an affiliate of ETIRC Aviation S.a.r.l., Luxembourg. ETIRC Aviation, a principal driver of the VLJ industry in Europe, is currently Eclipse's largest shareholder. ETIRC Aviation's Chair Roel Pieper has been the acting CEO of Eclipse since July 2008 and has served as Eclipse's Chair since January 2008. The proposed sale is subject to competitive bidding through a public auction, which is expected to be completed and a sale completed in January 2009.
The company also said that 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.
"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."
The company issued a statement that president and general manager of the company’s manufacturing division, Peg Billson, voluntarily left her position to pursue other career opportunities. She will be replaced by an interim manufacturing oversight provided by Eclipse's senior supply chain, engineering, production and flight operations leaders.