Eclipse Aviation

I was surprised to learn tonight that Eclipse Aviation had filed for bankruptcy protection.  I have been following this company since my partner Stephen, who is also a pilot, turned me onto it. 

There was a lot of buzz about this plane for a while leading up to it’s release,  not to mention a long waiting list of people looking to purchase one, hopefully they can get back on their feet one day soon!

NEW YORK (Associated Press) – Eclipse Aviation filed for bankruptcy protection Tuesday after failing to produce its very light jet as fast as its business plan required, forcing the manufacturer to take a loss on each aircraft it built.

The struggling Albuquerque manufacturer of the six-seat Eclipse 500 filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware.

The filing comes after a troubled year that saw layoffs of more than a third of its work force, the exit of its founder and former chief executive and mounting lawsuits from nearly a dozen disgruntled customers. Earlier this month the company sent employees home for two days after it was late making payroll.

“In the face of unprecedented economic challenges, it is clear that the sale of the Eclipse business through the Chapter 11 process was the right course of action to maximize the value of the business, secure its future and protect the best interests of Eclipse’s stake holders, including customers, suppliers, employees and creditors,” acting chief executive Roel Pieper said in a statement.

Pieper was not immediately available for comment Tuesday.

Under Chapter 11, a company seeks an order from a bankruptcy judge that prevents creditors from immediately seizing company assets. Most companies continue to operate in some form while seeking to reorganize and reduce their debt.

Eclipse Aviation plans to sell nearly all its assets _ valued at between $100 million and $500 million _ at a public auction that would be held in January, court records show. The company has more than $1 billion in liabilities.

Barring an offer from a higher bidder, the company would be sold to an affiliate of its largest shareholder, ETIRC Aviation, called EclipseJet Aviation International Inc., said Brad Robins, managing director of Greenhill & Co. Inc., a New York-based investment bank Eclipse hired as its financial adviser.

The company was able to add 300 European aircraft orders to its books after the Eclipse 500 received certification from the European Aviation Safety Agency on Friday, which is similar to getting Federal Aviation Administration certification in the U.S.

European certification allows Eclipse to sell its aircraft in 37 European countries.

Robins said Eclipse’s plant in Albuquerque, N.M., which employs 945 people, should see no major changes as a result of the bankruptcy proceedings.

“The goal is the company continues to operate; employees are keeping their jobs,” Robins said.

Part of the restructuring will allow Eclipse to obtain $20 million in loans from Eclipse board member Alfred E. Mann and ETIRC, which will be used to pay employees, court records showed.

Eclipse chief financial officer J. Mark Borseth said in an affidavit that keeping employees working is important for the future of the company.

“I believe that if (Eclipse is) unable to honor all such obligations immediately, employee morale and loyalty will be jeopardized at a time when such support is critical,” Borseth said in the affidavit.

He said the company had early production delays caused by introducing several new technologies to build the aircraft.

And Eclipse’s business plan required aircraft to be produced at “unprecedented volumes” to enable the company to price the jet lower than its competitors, Borseth said.

After Eclipse failed to meet production targets, the cost per aircraft increased.

“As a result, Eclipse continued to lose larger than expected sums of money on each aircraft manufactured,” Borseth said.

Eclipse announced earlier this year that it needed $200 million to $300 million in financing to stay afloat, but analysts agreed that in the midst of a global economic crisis, a “white knight” investor was unlikely to appear, making restructuring necessary.

Eclipse’s “experience in the past several years is that they were able to secure financing. I think with the world we’re in today, this (Chapter 11) is the basis in which they could get it,” Robins said.

Eclipse Aviation files for bankruptcy protection