June 30, 2021 – Further to the Court’s June 7th bidding procedures order [Docket No. 256] and the completion of an auction held on June 30th, the Debtors notified the Court that they have designated The Boeing Company ("Boeing") as the Successful Bidder in respect of itheir Kansas assets (the "Kansas Assets"); with NWI Wellington, LLC, NWI Park City, LLC, and NWI Admin, LLC (together, "NWI") as the Back-Up Bidder.
Unsurprisingly, given Boeing's tight-lipped, micro-management of the Debtors' asset sale process, details of the bidding and bids have not yet been filed with the Court. A sale hearing remains scheduled for July 9th.
The Back-Up Bidder, which had its efforts to get named as stalking horse blocked by Boeing, is comprised of entities controlled by Glass Holdings, LLC ("Glass") which also owns the Debtors.
On June 24th, the Court issued an order approving the $31.1mn sale of the Debtors Everett, Washington assets (the “Everett Assets”) to Wipro Givon USA, Inc. ("Wipro Givon") [Docket No. 313]. The Everett Assets stalking horse was handpicked by Boeing further to a marketing process which Boeing directly supervised; with Wipro Givon and Boeing also entering into a separate agreement regarding Wipro Givon’s proposal and related matters (the “Boeing-Wipro Agreement”) which has been filed under seal.
In respect of the Debtors' Kansas Assets, however, Boeing took a very different, if equally involved, approach. Boeing did not affirmatively select a stalking horse (in hindsight, it appears likely that Boeing always envisaged itself as the purchaser), but did effectively veto the Debtors’ own preferred choice, a non-Debtor affiliate controlled by current parent Glass. The Kansas Assets bidding procedures motion [Docket No. 192] provided: “the Debtors were prepared to enter into the asset purchase agreement [with Glass] to serve as a stalking horse bid in the process contemplated by this Motion…Boeing, as DIP lender, was not supportive of the Debtors’ entering into the asset purchase agreement.”
The Debtors’ bidding procedure motion continues: “The Debtors filed these chapter 11 cases to maximize value for their stakeholders by pursuing sales of their assets under section 363 of the Bankruptcy Code. By the procedures described in this Motion, the Debtors will continue to market their Kansas assets and solicit bids therefor in order to maximize value for the estates. Over the past two years, the Debtors’ business has been severely impacted by shifts in the airline industry’s procurement decisions due to the COVID-19 pandemic and related travel restrictions, as well as production halts related to The Boeing Company’s (‘Boeing’) 737 MAX aircraft. As a result, the Debtors pursued strategic alternatives, eventually determining to file these chapter 11 cases to pursue sales of substantially all of their assets. This Motion seeks to establish a process for the sale of the Debtors’ assets related to their two Kansas manufacturing facilities and headquarters (collectively, the ‘Assets’) to maximize the value of the Assets for these estates. By separate motion, the Debtors have sought to establish a process for the sale of their Everett, Washington assets.”
Marketing Process
The motion explains, “…in late 2020 the Debtors began to explore strategic options. Among the options explored was a potential out-of-court sale of the Debtors’ Kansas assets to NWI Aerostructures LLC (‘NWI’), a related Glass-owned entity. However, the Debtors and their significant stakeholders were unable to reach agreement on a consensual out-of-court path for such a transaction. Nevertheless, NWI and its affiliates remained interested in pursuing a transaction as the Debtors continued to explore their options.
In March 2021, the Debtors engaged Imperial Capital LLC (“Imperial”) as their investment banker. Since its initial engagement, Imperial has contacted about 80 potentially interested parties regarding a transaction for some or all of the Debtors’ assets (i.e., not only the Assets). As of the filing of this Motion, more than 30 of those parties have executed an NDA and others are in the process of negotiating an NDA. Imperial has also (i) set up a confidential data room for diligence and loaded it with relevant information on the Assets, (ii) responded to diligence requests from potentially interested bidders, and (iii) coordinated site visits for some parties. Since the Petition Date, Imperial has continued, and will continue, to market the Assets as well as the Debtors’ Washington assets.
Prior to filing this Motion, the Debtors engaged in extensive discussions with an affiliated party interested in acting as a stalking horse bidder for the Sale. Those discussions included advanced negotiations regarding a form of asset purchase agreement. After due consideration by the Special Committee, the Debtors were prepared to enter into the asset purchase agreement to serve as a stalking horse bid in the process contemplated by this Motion. The Debtors presented the proposed stalking horse bid to Boeing, as DIP lender, consistent with their obligations under the DIP Facility. However, it is the Debtors’ understanding that, because Boeing believed the potential stalking horse bid, among other deficiencies, (i) did not provide sufficient consideration to the estates, (ii) did not accurately reflect the economics of the transaction, and (iii) was inconsistent with the priorities in the Bankruptcy Code, Boeing, as DIP lender, was not supportive of the Debtors’ entering into the asset purchase agreement. Given the urgent need for the Debtors to move the process forward for the Sale of the Assets, the Debtors have filed this motion without a stalking horse but they intend to continue to engage with all interested parties to foster a robust bidding and Auction process.”
Boeing Relationship and Sale Efforts
The Martin Declaration provides: "On February 26, 2021, with the parties unable to reach agreement regarding a consensual path forward, Boeing notified TECT that after March 22, 2021 it would no longer advance funds under the Prepetition Credit Agreement [Boeing acquired the PNC loan in February 2021] except through an agreed debtor in possession financing as part of a bankruptcy proceeding.
Accordingly, in consultation with their advisors and professionals, the Debtors began exploring restructuring options to pursue through the chapter 11 process. Notwithstanding any formal agreement to extend the March 22, 2021 deadline, Boeing has continued to fund under the Prepetition Credit Agreement through the date hereof.
Over the past several months, TECT has evaluated restructuring alternatives and continued its discussions with Boeing and other parties to explore such alternatives, including potential out of court options. TECT, having considered the alternatives, believes that a sale will maximize the value of TECT’s assets.
Although it appeared that out of court restructuring was no longer an option, Boeing, recognizing that in order for it to continue to receive the necessary parts for its airplanes and TECT’s need for additional funding, continued to support the TECT business by providing funding under the Prepetition Credit Agreement. From the time it acquired the loan under the Prepetition Credit Agreement from PNC through the Petition Date, Boeing provided TECT with over $13.2 million in net new funding.
Further, TECT, understanding Boeing’s critical role as the most significant customer of TECT’s Everett, Washington facility, agreed in late 2020 to allow Boeing to begin exploring discussions with potential purchasers for the Everett operations. TECT believes that any potential purchaser would only be interested in considering a transaction for the Everett assets if it was confident that Boeing would continue to support the Everett operations as a customer. Boeing, the world’s largest aerospace company, has the knowledge and experience with respect to other similarly suited aerospace part manufacturers and, as a result, Boeing began contacting potential third party acquirers to determine their interest in a sale of TECT’s Everett business.
Further, the Debtors initiated their own sale process to find a potential buyer or buyers of their assets. In March 2021, the Debtors retained Imperial Capital, LLC (‘Imperial’) to provide investment banking services in connection with a potential sale. Imperial is currently evaluating certain prepetition offers for the various business units and developing a fulsome marketing and sale process.
As of the Petition Date, the Debtors have not entered into any agreements with respect to the sale of their assets. As set forth above, the Debtors are in the process of marketing their assets and are hopeful that this process will result in an executed asset purchase agreement or agreements that will allow the Debtors to sell all or a portion of their assets in the near term pursuant to section 363 of the Bankruptcy Code."
About the Debtors
According to the Debtors: “TECT Aerospace manufactures high-precision, complex components and assemblies and specializes in global supply chain management, featuring TECT Hypervelocity®, a fully integrated manufacturing process producing high-speed aluminum monolithic parts capable of jig and jigless assembly.
At our five facilities in the U.S., and with more than 65 years of aerospace experience, TECT Aerospace manufactures complex aerostructure components, parts and assemblies from the full spectrum of traditional and aerospace alloys. We specialize in complex, structural and mechanical assemblies, machined components, and sheet metal fabrication for countless aerospace applications. We currently produce thousands of assemblies and parts that are used in flight controls, fuselage/interior structures, doors, wings, landing gear, struts & nacelles, and cockpits.
TECT Aerospace is a privately held, independently managed aerospace company. Everything we manufacture runs through our integrated supply chain, so your parts deliver on time every time with competitive pricing. Make TECT Aerospace a part of your supply chain, and discover how you can increase the velocity of your value stream."
The Martin Declaration adds: "The Debtors are privately held companies owned by Glass Holdings, LLC ('Glass') and related Glass owned or Glass controlled entities.
The Debtors manufacture high precision components and assemblies for the aerospace industry, specializing in complex structural and mechanical assemblies, and, machined components for a variety of aerospace applications. The Debtors produce assemblies and parts used in flight controls, fuselage/interior structures, doors, wings, landing gear and cockpits. As is commonplace throughout the aerospace industry, the Debtors’ business functions under a tiered supply chain structure whereby the Debtors manufacture and service specialized aerospace components that are in turn utilized and incorporated by customers into their platforms and planes. Established in 2004, the Debtors supply many of the largest aerospace manufacturers in the world, including Boeing, and their products are used by customers in the commercial, business, military, and general aviation markets.
The Debtors operate manufacturing facilities in Everett, Washington, and Park City and Wellington, Kansas and their corporate headquarters is located in Wichita, Kansas. The Debtors currently employ approximately 400 individuals nationwide.
Corporate Structure Chart
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The post TECT Aerospace Group Holdings, Inc. – Selects Boeing as the Successful Bidder for Kansas Assets with Glass Entities as Back-Up Bidder, Schedules July 9th Sale Hearing appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.