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Virgin Orbit Holdings Inc. – Court Approves Bidding Procedures for Expedited Sale Process as Search for Buyer Continues


May 1, 2023 – The Court hearing the Virgin Orbit Holdings cases issued an order: (i) approving bidding procedures in relation to the sale of substantially all of the Debtor’s assets, (ii) authorizing the Debtors to enter into stalking horse arrangements (no potential stalking horse flagged yet, deadline to do so is May 17, 2023), (iii) authorizing the Debtors to offer bid protections to any selected stalking horse and (iv) adopting (as proposed) an expedited auction/sale timetable culminating in an auction on May 18, 2023 and a sale hearing on May 24, 2023 [Docket No. 201].

Any Sales Traction?

Although the Debtors noted that investment banker Ducera Partners had begun a marketing process prepetition, there was little in the Debtors' requesting motion that suggests there is anything concrete in a process which has yet to see a stalking horse named (or suggest one is on the horizon) and which is nonetheless set to move quickly (bid deadline is May 15th). 

The motion notes that the in-Court sale effort will benefit from "certain advantages that were not available to the Debtors during the prepetition marketing process" but there is nothing in the motion to suggest that this entails anything beyond the standard section 363 benefits. The closest thing to optimism as to the sale process and potential stalking horse ("if one can be identified") is the statement that "the Debtors believe that certain parties identified during their prepetition marketing efforts as well as new parties will have interest in pursuing an acquisition of the Debtors or their assets either in whole or part."

The Debtors' April 19th Disclosure Statement did not update on the Debtors’ sales efforts but a sale-related risk factor provided little in the way of re-assurance that efforts are now faring better in-Court than they did out-of-Court: “The Debtors, in coordination with their advisors, conducted a prepetition marketing process, which did not yield an acceptable purchaser for the Debtors’ business. This lack of appetite for the Debtors’ assets may continue during these Chapter 11 Cases as the Debtors seek to enter a Sale Transaction.” Yes, a risk factor, but as of April 19th the needle seemed stuck at "lack of appetite."

In a recent interview (also published on April 19th) CEO Dan Hart was arguably slightly more sanguine about the prospect of a sale, noting that Virgin Orbit "has been in “a lot of discussions” with potential buyers. Asked if he was confident one would step up and rescue the company, he said: “We’ll see how that works out. But that’s my objective.”

Case Status

On April 4, 2023, Virgin Orbit Holdings Inc. and four affiliated debtors (Nasdaq: VORB; together “Virgin Orbit“ or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn (as of September 30, 2022, assets were at $243.0mn and liabilities at $153.5mn).

On April 19, 2023, the Debtors filed a Chapter 11 Plan of Reorganization and a related Disclosure Statement [Docket Nos. 96 and 97, respectively]; and further requested a Court order approving: (i) the adequacy of the Disclosure Statement (conditionally), (ii) proposed voting and solicitation procedures and (iii) a proposed timetable culminating in a July 3, 2023 confirmation hearing [Docket No. 98].

On May 1st, the Court hearing the Virgin Orbit Holdings cases issued a final order authorizing the Debtors to: (i) access a further $15.15mn in new money, debtor-in-possession being provided by parent Virgin Investments Limited (“VIL” or the “DIP Lenders”) and (ii) roll up $31.60mn of prepetition debt owed VIL. With an April 5th interim DIP order, the Debtors had been authorized to access $12.25mn of the new money DIP and roll up $10.9mn of the prepetition debt owed VIL. 

Bidding Procedure Motion

The Debtors' requesting motion [Docket No. 75] states, “The Debtors commenced the Chapter 11 Cases to facilitate a timely and efficient process aimed at maximizing the value of the Debtors’ estates for the benefit of all stakeholders. Following a prepetition marketing process, the Debtors determined, in consultation with their advisors, that an expedited Sale process under chapter 11 of the Bankruptcy Code is the best path forward to consummate a value-maximizing sale of the Assets for the benefit of all stakeholders under the circumstances. For the reasons set forth herein, a marketing and Sale process under section 363 of the Bankruptcy Code provides the Debtors with certain advantages that were not available to the Debtors during the prepetition marketing process. Furthermore, the Debtors believe that certain parties identified during their prepetition marketing efforts as well as new parties will have interest in pursuing an acquisition of the Debtors or their assets either in whole or part.

Accordingly, the Debtors file this Motion to approve the proposed Bidding Procedures while they work to identify a Stalking Horse Bidder for the sale of the Assets. A Stalking Horse Bidder, if one can be identified, permits the Debtors to secure a bid that will serve as a floor for all other potential bids. The ultimate aim of these proposed procedures is to allow the Debtors to identify a Stalking Horse Bidder and thereafter facilitate a productive Auction, where interested parties will have an opportunity to bid on the Assets. The Bidding Procedures proposed by this Motion ensure that the Debtors’ postpetition marketing and Sale process builds upon the prepetition process in a fair, open manner that encourages bidders to submit proposals in a manner that maximizes asset value.”

Marketing Process

The motion continues, “through the Bidding Procedures outlined in this Motion, the Debtors intend to build upon their prepetition efforts by marketing the Assets more broadly than the Company executed prepetition. The Debtors’ proposed investment banker, Ducera Partners LLC (“Ducera”) has already begun the postpetition marketing process in connection with the filing of these Chapter 11 Cases, contacting all parties from the prepetition process as well as additional potential purchasers, including those who may be interested in only a subset of the Assets. Pursuant to the Bidding Procedures, the Debtors intend to market the Assets to potential buyers and facilitate access to diligence materials. Such materials include a non-confidential presentation and, for those executing a non-disclosure agreement with the Debtors, access to a virtual data room (the “Data Room”), which will contain confidential presentation materials, additional legal, financial, operational, and other information on the Debtors and, as appropriate, meetings with management. This postpetition marketing process for the Assets will include a broader universe of potential buyers than the prepetition process, and the Debtors believe that their ability to sell the Assets free and clear of claims and interests, provides the best path forward to consummating a value maximizing transaction.”

Key Dates (adopted as proposed)

  • Bidding Procedures Hearing: May 1, 2023
  • Stalking Horse Supplement Deadline: May 8, 2023
  • Deadline to object to the Sale of the Assets: May 11, 2023
  • Bid Deadline: May 15, 2023
  • Deadline for Debtors to notify Potential Bidders of whether their Bids are Qualified Bids: May 17, 2023
  • Auction (if necessary): May 18, 2023
  • Sale Hearing: May 24, 2023
  • Sale Closing: June 2, 2023

Events Leading to the Chapter 11 Filings

The Hart Declaration [Docket No. 14] provides: “In July 2021, the Company announced that it planned to go public through a merger with a special purpose acquisition company, called NextGen Acquisition Corporation II (‘NextGen’). The merger resulted in the Company becoming a publicly traded company in December 2021 through a de-SPAC transaction (the ‘de-SPAC’). While the Company raised approximately $228 million in net proceeds in connection with the de-SPAC and related transactions, these proceeds were significantly less than the Company had anticipated. Indeed, over 82% of NextGen’s total public shares were redeemed in connection with the de-SPAC, and accordingly, the Debtors received only $67.8 million in gross proceeds from the de-SPAC, significantly less than the potential $382 million that the Debtors had expected….Since the de-SPAC, the Company has pursued a broad range of strategic transactions designed to address its continuing liquidity needs. In the beginning of 2022, the Company began working with Goldman Sachs & Co. LLC (“Goldman Sachs”) and BofA Securities, Inc. (“BofA”) to pursue a potential sale or, alternatively, to assist with a capital raise.

While, up until shortly before the Petition Date, the Company received responses from several parties potentially interested in participating in varying transactions, no transactions were consummated….Moreover, in January 2023 (during the marketing process), the Company suffered a launch failure, giving rise to negative publicity and further challenges in identifying a buyer or capital source.”

Prepetition Shareholders

Sir Richard Branson holds 74.8% of the Debtors via the following holding structure

  • Debtor Virgin Orbit Holdings Inc. is 74.8% held by Virgin Investments Limited (“VIL”). VIL is wholly owned by Virgin Group Investments LLC, whose sole managing member is Corvina Holdings Limited, which is wholly owned by Virgin Group. Virgin Group is owned by Sir Richard Branson. 
  • Debtor Vieco USA, Inc. is 100% owned by Virgin Orbit Holdings.
  • Debtor Virgin Orbit, LLC (“Virgin Orbit”) is 100% owned by Debtor Vieco USA, Inc.
  • Debtor Virgin Orbit National Systems, LLC is 100% owned by Virgin Orbit.
  • Debtor JACM Holdings, Inc. is 100% owned by Virgin Orbit.

About the Debtors

According to the Debtors: “Virgin Orbit Holdings, Inc (Nasdaq: VORB) operates one of the most flexible and responsive space launch systems ever built. Founded by Sir Richard Branson in 2017, the Company began commercial service in 2021, and has already delivered commercial, civil, national security, and international satellites into orbit. Virgin Orbit’s LauncherOne rockets are designed and manufactured in Long Beach, California, and are air-launched from a modified 747-400 carrier aircraft that allows Virgin Orbit Holdings, Inc to operate from locations all over the world in order to best serve each customer’s needs.”

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The post Virgin Orbit Holdings Inc. – Court Approves Bidding Procedures for Expedited Sale Process as Search for Buyer Continues appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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