Virgin Orbit Holdings Inc (NASDAQ:VORB) has filed for Chapter 11 bankruptcy but received a US$31.6mln financing commitment from founder Sir Richard Branson’s Virgin Investments to allow it to continue operating during the process.
It said it plans to use the debtor-in-possession (DIP) financing from Virgin Investments and the Chapter 11 process “to maximize value for its business and assets”.
Last week, the company laid off 85% of its workforce after failing to secure a larger rescue fundraising, following a failed mission in January that sent the group into a final tailspin.
Once approval is received from the bankruptcy court, Virgin Orbit said it expects the DIP financing to give it enough liquidity to continue operating as it tries to sell the business.
“We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the company,” said chief executive Dan Hart.
“At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.”
Operating as a ‘debtor-in-possession’ under the jurisdiction of the bankruptcy court and with the DIP funding, the company said it intends to pay suppliers and vendors to the “fullest extent possible” and is “committed to working with its customers as it tries to find a buyer that will be able to continue to fulfill their needs”.
Branson, via Virgin Investments, last week handed another US$10.9mln via senior secured convertible note to the Long Beach, California-based company, adding to the US$10mln loan supplied in February, US$20mln via a secured note in December and US$25mln cash injection in November.
The latest SEC filings reveal that under the secured notes the company has pledged first-priority on substantially all of their assets, including all aircraft, aircraft engines and related assets to Virgin Investments, which is the investment arm of Branson's Virgin Group, which was 74.8%-owner of the Virgin Orbit before any of the loan notes were converted.
As DIP financing is considered senior to all other debt and equity in a bankruptcy proceeding, if the company is liquidated, the DIP lenders will be the first to receive repayment before any other creditors or shareholders.