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August 31, 2022 – The Court hearing Masten Space Systems case issued a final order authorizing the Debtor to: (i) access a further $500k balance of what is in total $1.4mn of new money DIP financing from Astrobotic Technology, Inc. (“Astrobotic” or the “DIP Lender,” also the Debtor's stalking horse) and (ii) continue using cash collateral [Docket No. 118]. With an August 16th interim DIP order [Docket No. 48], the Debtor got access to a first $900k of the DIP financing.
On July 29, 2022, privately-held Masten Space Systems, Inc. (“Masten Space“ or the “Debtor”) filed for Chapter 11 protection, noting estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $10.0mn and $50.0mn. At filing, the Debtor, “an aerospace manufacturer startup company in Mojave, California that is developing a line of vertical takeoff, vertical landing rockets,” noted that its “Masten Mission 1” (or “MM1”) project "directly and indirectly lead to numerous costs and liabilities, many of which were unforeseeable due to, among other things, COVID-19 and supply chain problems, that ultimately led to Masten’s bankruptcy filing."
It also stated its intention to pursue "(a) a sale of the Company’s SpaceX launch credit (the 'Sale Transaction') pursuant to a stalking horse asset purchase agreement with Intuitive Machines, LLC* and (b) a sale of the Company’s remaining assets to one or more purchasers…"
* Intuitive Machines, LLC is a competitor of the ultimately selected stalking horse Astrobotic; interesting background on the rivalry here.
Key Terms of the DIP Facility:
- Borrowers: Masten Space Systems, Inc.
- DIP Lender: Astrobotic Technology, Inc. or its respective assigns.
- Commitment/Borrowing Limits: Up to $1.4mn, with up to $900k available on an interim basis.
- New Money: $1.4mn
- Roll-up: N/A
- Interest Rate: 12% per annum.
- Default Interest: 6% above the interest rate applicable immediately prior to the occurrence of an Event of Default.
- Closing Fee: A fee equal to One Hundred Thousand Dollars ($100,000.00) shall be fully earned by DIP Lender on the date the Interim DIP Loan is paid to Borrower and shall be payable to DIP Lender on the Maturity Date.
- Commitment Fee: An initial commitment fee equal to Seventy-Five Thousand Dollars ($75,000.00) shall be fully earned by DIP Lender on the date of entry of the Interim DIP Order and shall be payable to DIP Lender on the Maturity Date (the “Initial Commitment Fee”). A final commitment fee equal to Seventy-Five Thousand Dollars ($75,000.00) shall be fully earned by DIP Lender on the date of entry of the Final DIP Order and shall be payable to DIP Lender on the Maturity Date (the “Final Commitment Fee,” and, with the Initial Commitment Fee, the “Commitment Fees”).
- Exit Fee: A fee equal to One Hundred Fifty Thousand Dollars ($100,000.00) shall be fully earned by DIP Lender on the date on which the Bankruptcy Court enters the Interim DIP Order and shall be payable to DIP Lender on the Maturity Date (the “Exit Fee”).
- Use of DIP Proceeds: The proceeds of the DIP Loans shall be utilized for the following:
- working capital and general corporate purposes of Borrower and the administration of the Chapter 11 Case in accordance with the DIP Budget; and
- the repayment of the DIP Loans, the payment of Interest and the DIP Fees, and the reimbursement of DIP Lender Expenses.
- Maturity: The DIP Loans shall mature on the earliest to occur of the following or as set forth under “Mandatory Prepayment” herein with respect to the amounts set forth therein (such date, the “Maturity Date”):
- sixty (60) calendar days after the date of entry of the Interim DIP Order (the “Outside Date”);
- twenty-five (25) calendar days after entry of the Interim DIP Order if the Final DIP Order has not been entered;
- the date upon which the Bankruptcy Court enters an order approving financing between Borrower and a person or entity other than DIP Lender;
- the closing of any sale of any of Borrower’s assets in accordance with section 363(b) of the Bankruptcy Code that indefeasibly satisfies the DIP Obligations in full;
- the “substantial consummation” (as defined in section 1101 of the Bankruptcy Code and which, for purposes hereof, shall be no later than the effective date of a confirmed chapter 11 plan) of a chapter 11 plan in the Chapter 11 Case;
- the date upon which the acceleration of any of the DIP Loans or the termination of the commitments to make the DIP Loans occurs following an Event of Default;
- the filing of a motion by Borrower seeking dismissal of the Chapter 11 Case, the dismissal of the Chapter 11 Case, the filing of a motion by Borrower seeking to convert the Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, or the conversion of the Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code; and
- Borrower’s failure to use its best efforts to contest, object to, or seek withdrawal of any motion by any person or entity seeking to convert the Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code.
- Milestones: The DIP Credit Agreement contains the following milestones:
- Deadline to file (a) all “first day” pleadings and (b) the DIP Motion; no later than August 10, 2022.
- Deadline to obtain entry of the Interim DIP Order; on or before August 15, 2022.
- Deadline to obtain entry of the bidding procedure Order; on or before August 26. 2022.
- Deadline to obtain entry of the Final DIP Order; on or prior to twenty-five days after the entry of the Interim DIP Order.
- Deadline to obtain qualifying bids for the Sale Transaction; on or before September 2, 2022.
- Deadline to conduct the auction; on or before September 6, 2022.
- Deadline to obtain entry of a Bankruptcy Court order (the “Sale Hearing”) approving the Sale; on or before September 8, 2022.
- Deadline to consummate closing of the sale(s) to the Accepted Bidder(s); by no later than September 9, 2022
In a declaration in support of the DIP motion [Docket No. 13], Edward T. Gavin, Managing Director of the firm Gavin/Solmonese LLC, on behalf of the Debtor states, “…in addition to the parties it had already contacted about purchasing the assets, Gavin/Solmonese contacted more than sixty additional parties to solicit their interest in providing postpetition financing. Substantially all of those potential lenders would not agree to provide a postpetition loan to Masten. My understanding from speaking with the potential lenders is that there was limited interest because of (i) the small size of the loan, (ii) the short duration of the loan, and (iii) the non-traditional collateral for the loan.
Ultimately, the Debtor was able reach a tentative agreement with a potential lender for up to $1,100,000 in postpetition financing for the Debtor (with an initial $600,000 to be funded on an interim basis). The postpetition financing was subject to certain conditions, including that the Debtor enter into an unconditional asset purchase agreement (or purchase agreements) for some or all of the Debtor’s assets, in an aggregate amount of at least $4,000,000. Significantly, any such sale agreement (or agreements) would be subject to the approval of the potential lender.
After discussing the Debtor’s assets with several parties, on or about August 8, 2022, Masten entered into a tentative agreement with Astrobotic Technology, Inc. (‘Astrobotic’) to assign to Astrobotic the debtor’s right to a certain $14,000,000 credit (the ‘SpaceX Credit’) from Space Exploration Technologies Corp. (‘SpaceX’) through which SpaceX would provide a launch on a SpaceX vehicle to the assignee.
Ultimately, the Debtor and Astrobotic were able to reach an agreement by and through which Astrobotic would be a stalking horse bidder for substantially all of the Debtor’s assets for a purchase price of (i) $4,500,000 plus; (ii) a waiver of its claims, plus; (iii) payment of cure costs for any executory contracts or leases assumed and assigned to Astrobotic. Further Astrobotic or its assignee agreed to provide secured postpetition financing in the amount of $1,400,000, which will allow the Debtor to continue its postpetition marketing and provide for the case to be properly administered and an expected distribution to unsecured creditors. Astrobotic will be permitted to credit bid its loan to the Debtor, including all fees and reimbursable expenses in connection with its loan, in connection with its stalking horse bid.
Significantly, the DIP Credit Facility with the DIP Lender is significantly less expensive than the fees and expenses sought by originally anticipated lender in exchange for providing financing to the Debtor through the sale process.
Based on the facts and circumstances of the case, the Debtor believes, as a sound exercise of its business judgment, that the DIP Credit Facility and consensual use of cash collateral represents the best (and likely only) financing option available under the circumstances, particularly given the duration and amount of the proposed loan and the Debtor’s assets.”
As of the Petition Date, Masten owed creditors a total of approximately $16.0mn all of which are unsecured other than one prepetition creditor, Agile Space Industries, Inc. (“Agile”), which has asserted a security interest.
Initial DIP Budget [ANNEX B to Credit Agreement]
About the Debtor
According to the Debtor: “Masten Space Systems was born in the Mojave Desert in 2004. Our founder and CTO David Masten had one idea in mind: tear down the barriers to space.
David believed rockets should operate more like airplanes than ballistic missiles. That’s why we use reusable technologies, autonomous systems, and small operational teams so our rockets can launch, land, refuel, and fly again. This approach allows us to test often, iterate quickly, and reduce costs for every rocket we fly and every technology we develop.
Not to toot our own horn, but Masten has the most successful rocket-powered landings in the industry with more than 600 flights across five reusable rockets. These rocket innovations have allowed us to evolve into the space infrastructure company we are today.”
According to news reports, On July 20th, the Debtor "laid off all of its employees, placing the company and a $75.9 million NASA-funded mission to transport the MoonRanger rover and eight research payloads to the lunar surface atop Masten’s XL-1 lander late next year at jeopardy."
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