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June 6, 2023 – In advance of a June 8th Disclosure Statement hearing, the Debtors filed a First Amended Plan of Reorganization and a related Disclosure Statement [Docket No. 410], with the filing also attaching blacklines of each document showing changes to versions filed on April 19th. A revised proposed Disclosure Statement Order was also filed at Docket No. 411.
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.
On May 1, 2023, the Court hearing the Virgin Orbit Holdings cases issued its bidding procedures order [Docket No. 201].
Also 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.
On May 25th and May 26th, the Court issued orders approving the sales of assets to Stratolaunch, LLC, Rocket Lab USA, Inc., Inliper Acquisition, LLC and Liquidity Services Operations, LLC and Launcher, Inc. [Docket Nos. 364, 365, 378 and 379, respectively].
The completed sales include the following:
- Rocket Lab Asset Purchase Agreement: On June 2, 2023, pursuant to an asset purchase agreement with Rocket Lab USA, Inc., Rocket Lab assumed the Company’s commercial lease in Long Beach, California and completed the purchase of specified assets from the Debtors, including machinery and equipment located at such facility, for an aggregate purchase price of $16.1 million. In connection with the transaction, Rocket Lab also assumed certain liabilities described in the asset purchase agreement.
- Inliper Asset Purchase Agreement: On June 2, 2023, pursuant to an asset purchase agreement with Inliper Acquisition, LLC and Liquidity Services Operations, LLC (together, “Inliper”), the Company completed the sale of specified assets to Inliper, including machinery and equipment located at the Company’s McGowen facility in Long Beach, California, for an aggregate purchase price of $650,000. In connection with the transaction, Inliper also assumed certain liabilities described in the asset purchase agreement.
- Launcher Asset Purchase Agreement: On June 2, 2023, pursuant to an asset purchase agreement with Launcher, Inc, the Company completed the sale of specified assets to Launcher, including machinery and equipment located at the Company’s facility in Mojave, California, for an aggregate purchase price of $2.7 million. In connection with the transaction, Launcher also assumed certain liabilities described in the asset purchase agreement.
- Stratolaunch Stalking Horse Asset Purchase Agreement: On June 5, 2023, pursuant to a stalking horse asset purchase agreement with Stratolaunch, LLC, the Company completed the sale of specified assets to Stratolaunch, including the Company’s specially modified Boeing 747 aircraft, known as Cosmic Girl, and certain other specifically scheduled assets primarily related to the aircraft, for an aggregate purchase price of $17.0 million. In connection with the transaction, Stratolaunch also assumed certain liabilities described in the stalking horse asset purchase agreement.
Updated Proposed Key Dates
- Plan Supplement Filing Date: (7) days prior to the Voting Deadline.
- Objection Deadline for Confirmation Hearing: July 11, 2023
- Voting Deadline: July 11, 2023
- Confirmation Hearing: July 18, 2023
The Disclosure Statement now provides the following top level overview, with highlighted language (notably in respect of the DIP facility, as highlighted in the Disclosure Statement): "…in order to maximize value for all stakeholders, the Debtors conducted the Sale Process, which culminated in an auction held on May 22, 2023, pursuant to which substantially all of the Debtors’ assets were sold to various purchasers, with the exception of certain assets. The Debtors shall fund distributions under the Plan with Cash on hand, monetization of the Debtors’ remaining assets, and, if necessary, contributions from VIL.
To the extent of any shortfall and if all conditions precedent to the Effective Date of the Plan are satisfied, VIL shall provide the Debtors or the Plan Administrator, as applicable, Cash in an amount sufficient to fund (a) the Administrative Claims (other than DIP Facility Claims), Priority Tax Claims, Other Priority Claims, and Other Secured Claims in accordance with the Plan, in each case to the extent Allowed against the Debtors; (b) the Professional Fee Escrow Account; (c) the Wind-
Down Amount; and (d) the GUC Cash-Out Pool (if Class 4 votes to accept the Plan).
The proceeds from the Sale Process will not be of sufficiently large value to pay the DIP Facility Claims in full."
The following is an updated (highlighted in blue) summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below):
- Class 1 (“Other Priority Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan.
- Class 2 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan.
- the Plan.
- Class 3 (“Prepetition Secured Notes Claims”) is impaired and entitled to vote on the Plan. The estimated amount of claims is $28,400,000. Each holder shall receive all Distributable Proceeds remaining after payment in full in Cash of the DIP Claims pursuant to Article II.B. up to the Allowed amount of the Prepetition Secured Notes Claims. If Confirmation occurs, to the extent the Distributable Proceeds are insufficient to satisfy the Prepetition Secured Notes Claims in full, the Prepetition Secured Noteholder agrees not to receive any distribution on account of any resulting deficiency claims and shall not receive a Pro Rata Share of the GUC Recovery Pool on account of such deficiency claims; provided that notwithstanding anything to the contrary herein, the right to receive Distributable Proceeds on account of such Prepetition Secured Notes Claims and the right to credit bid such claims up to the unpaid amount of Prepetition Notes Claims in connection with any sale of the Debtors’ assets (whether prior to or after the Effective Date), other than a Remaining Asset Sale, shall be preserved until all assets in the Debtors’ Estates have been liquidated.
- Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $197,658,283.32 and the estimated recovery is 0.17% – 0.24% to 22% to 4.35% [The low end of this range assumes that there will be no recovery on the Remaining Asset Sales and,
accordingly, no GUC Distributable Proceeds. The high end of this range assumes the maximum recovery on the Remaining Asset Sales and thus $3.5 million in GUC Distributable Proceeds. In all scenarios, the GUC Cash Out Pool is assumed to have a minimum value of $200,000]. On the Effective Date, (a) if Class 4 votes to accept the Plan, each Holder of an Allowed General Unsecured Claim shall receive, in full and final satisfaction of its General Unsecured Claim, its Pro Rata Share of the GUC Cash-Out Pool and the GUC Distributable Proceeds; and (b) if Class 4 votes to reject the Plan, each General Unsecured Claim Holder shall receive no distribution on account of its General Unsecured Claim and the Debtors may seek approval of the Dismissal Motion or conversion of these Chapter 11 Cases to chapter 7 of the Bankruptcy Code.
- Class 5 (“Intercompany Claims”) is unimpaired/ Impaired, presumed to accept/ Deemed to Reject and not entitled to vote on the Plan.
- Class 6 (“Subordinated Claims”) is Impaired, Deemed to Reject and not entitled to vote on the Plan.
- Class 7 (“Intercompany Interests”) is unimpaired/ Impaired, presumed to accept/ Deemed to Reject and not entitled to vote on the Plan.
- Class 8 (“Equity Interests”) is Impaired, Deemed to Reject and not entitled to vote on the Plan.
- “GUC Cash-Out Pool” means Cash equal to $200,000, which amount shall be increased dollar for dollar by any positive difference between (a)
$1,250,000 minus (b) the amount of the Allowed Professional Fee Claims of the Committee Professionals.
- “GUC Distributable Proceeds” means (a) 100% of the aggregate Remaining Asset Sale Net Proceeds between $0 and $750,000, (b) 50% of
the aggregate Remaining Asset Sale Net Proceeds between, $750,000 and $5,000,000, (c) 25% of the aggregate Remaining Asset Sale Net Proceeds
between $5,000,000 and $7,500,000 and (d) 0% of the aggregate Remaining Asset Sale Net Proceeds above $7,500,000.
- “Remaining Asset Sale Net Proceeds” means the aggregate cash proceeds received by the Debtors in respect of any Remaining Asset Sale, net of the
direct costs relating to such asset sale.
- “Remaining Asset Sales” means the disposition of any non-Cash asset of the Debtors' Estates, excluding (i) assets subject to the Existing 363 Sale
Orders; (ii) all inventory assets related to the Conant Facility and the McGowen Facility; (iii) all IP Assets; and (iv) the proceeds of any retained
Causes of Action of the Estates.
The Revised Disclosure Statement [Docket No. 410] attaches the followings exhibits:
- Exhibit A: Plan
- Exhibit B: Organizational Chart
- Exhibit C: Liquidation Analysis
At filing, the Debtors’ prepetition debt consists of Secured Convertible Notes provided by VIL and Yorkville Unsecured Notes. From November 2022 through the Petition Date, VIL provided over $70 million in capital support to the Debtors in the form of the Secured Convertible Notes. A summary of the Debtors’ prepetition funded debt is provided below:
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."
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.
Liquidation Analysis (see Exhibit C to Disclosure Statement for notes)
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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