August 23, 2021 – The Court hearing the TECT Aerospace Group Holdings cases extended (for a second time) the periods during which the Debtors have an exclusive right to file a Plan and solicit acceptances thereof, through and including October 4, 2021 and December 2, 2021, respectively [Docket No. 442]. Absent the relief, the initial Plan filing and solicitation periods were scheduled to expire on August 3, 2021 and October 5, 2021, respectively.
An August 25th hearing, at which the exclusivity extensions were to be considered, has been cancelled.
The @ 60-day Solomonic extensions are less than the 90 days requested and more than the 30 days urged in an August 17th objection filed by the Debtors' official committee of unsecured creditors (the "Committee") [Docket No. 422]. In that objection, largely used as a vehicle to continue voicing its dissatisfaction with the Debtors and Boeing, the Committee gave its view as to why the Debtors' Chapter 11 runway should not be extended: "The Committee has serious concerns about the lack of any meaningful progress towards a consensual plan of liquidation, or any plan, and the Debtors’ exit from these chapter 11 cases. Indeed, the DIP milestone to file a chapter 11 plan has already been extended once from July 19, 2021 to August 6, 2021, and, yet, the Committee has not even seen a draft of a chapter 11 plan, let alone a plan term sheet. Furthermore, with substantially all of the Debtors’ assets having been sold, the Committee questions the necessity of a nearly three-month extension of the Exclusive Periods. Such a request is unduly long given the facts and circumstances of these cases and the Committee respectfully requests that an extension of the Exclusive Periods, if any, be limited to no more than thirty (30) days. Not only is a thirty-day extension more than sufficient to prepare and file a plan of liquidation, it is economically prudent given the estates’ limited assets and resources.
In the Motion, the Debtors state that they engaged in discussions with the Committee regarding the wind down of the Debtors’ estates. Any such discussions have been cursory, high level discussions, at best; a far cry from substantive plan negotiations regarding, among other critical matters, the preservation of estate claims against the Debtors’ insiders and other related parties, the resolution of the Committee’s lien challenges, and the recoveries for unsecured creditors and other stakeholders. Despite the Committee’s repeated efforts to convince the Debtors and Boeing to dual track the sale processes and formulation of a plan (as was originally contemplated in the Final DIP Order), the Debtors and Boeing have ignored the Committee’s urging, declined to engage in any substantive discussions, and failed to respond to a settlement term sheet proposed by the Committee nearly two months ago."
The Extension Motion
The extension motion explains, “Since the Petition Date, the Debtors have made significant and material progress towards advancing these chapter 11 cases…the Debtors have obtained the Court’s approval of sale orders for substantially all of the assets related to their Everett, Washington manufacturing business and their Kansas manufacturing business (together, the ‘Sale Orders’). The assets purchased pursuant to Sale Orders represent substantially all of the Debtors’ assets. Given the Debtors’ focus on obtaining approval of the Sale Orders through the first four months of these chapter 11 cases, the Debtors are now focusing their attention to the winddown and resolution of these chapter 11 cases and the Debtors believe that it is reasonable to request extensions of the Exclusive Periods…The Debtors have focused the majority of their efforts to this point on the two sales that were approved by the Sale Orders. Having now or in the near future consummated the sales of substantially all of their assets, the Debtors have begun to engage with the Secured Lender and the Committee regarding the winddown of the Debtors’ estates. The proposed extensions requested herein will provide the Debtors with additional time to negotiate with creditors and finalize their plans for the winddown and eventual resolution of these chapter 11 cases, including, if appropriate, the time to seek approval of a disclosure statement and to proceed to solicitation and confirmation of a plan.”
Background
On July 13th, the Court issued an order approving the sale of the Debtors’ Kansas assets (the "Kansas Assets") to Central Kansas Aerospace Manufacturing, an acquisition vehicle created by the Boeing Company (“Boeing” or “Parent”) [Docket No. 372] with the Debtors valuing the Boeing bid at $38.8mn.
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.”
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.
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The post TECT Aerospace Group Holdings, Inc. – Court Grants Shorter than Requested Plan Exclusivity Extensions After Creditors’ Committee Voices Concerns Over Failure of Boeing-Led Plan Efforts to Get Off the Ground appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.