Eclipse Aviation has been forced in to Chapter 7 liquidation by its creditors after attempts to rescue the struggling developer of the Eclipse 500 very light jet foundered leaving the company penniless.
The move comes three months after Eclipse entered Chapter 11 bankruptcy protection and a month after company’s assets were sold to a new firm EclipseJet Aviation – formed by chief executive Roel Pieper – for $28 million in cash and $160 million in promissory notes and equity.
In papers filed on 24 February in the US bankruptcy court in Delaware, the creditors - Kings Road Investments, HBK Services, and Citadel Investment Group - state that Eclipse Aviation had satisfied all of the conditions to closing on 23 January but EclipseJet still lacks financing to close the transaction, “The debtors can no longer wait, they are literally out of cash and as of the 18 February had furloughed nearly all of the workforce without pay,” the court papers state. The motion argues that no business remains to be reorganised and that the “cases should be converted to Chapter 7 in order to limit administrative expenses”.
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In a letter to employees issued on 24 February, president and general manager Mike McConnell and chief financial officer Mark Borseth of Eclipse said: “We are very sad to report unexpected news today. Despite the efforts of many people at EclipseJet Aviation and Etirc to obtain necessary funding to close the purchase of the assets of Eclipse Aviation, the closing of the sale transaction has stalled and our company is out of time and money.
“Given the dire circumstances in today’s global marketplace and the lack of additional debtor-in-possession funding, the senior secured creditors of the company filed a motion today to convert the Chapter 11 case to a Chapter 7 liquidation. This action, under the circumstances, is being supported by the directors of Eclipse.”
In an added blow to employees Eclipse says it is unable to make its payroll commitments: “Most regrettably, you will not receive the paycheck due on Thursday 5 March, nor is any vacation pay available. You may have certain rights to seek payment in the bankruptcy proceeding, you may receive additional information about that from the bankruptcy court, which will likely appoint a Chapter 7 trustee in our case within 30 days.” The trustee will control all assets of Eclipse and will seek to sell them.
Source: Flight International
