Eclipse Aviation enters Chapter 7 liquidation

The developer of composites-intensive very light jets had filed for Chapter 11 reorganization in November, but now is forced into liquidation.

The New Mexico Business Journal (Albuquerque, N.M., USA) reported on Feb. 25 that Eclipse Aviation Corp. (Albuquerque, N.M.), developer of composites-intensive very light jets, will not contest a motion by senior secured creditors to convert Eclipse’s bankruptcy proceedings to a Chapter 7 liquidation.

The company said it has suspended all business operations and expects the U.S. Bankruptcy Court in Delaware to promptly appoint a trustee to oversee the liquidation of assets. Eclipse, which makes the 6-seat Eclipse 500 very light jet in Albuquerque, had filed for Chapter 11 protection with the court in November 2008. In January, the court approved a proposal by a new company, EclipseJet Aviation International Inc., to buy the jet maker for $28 million in cash to reorganize and emerge without the $1 billion-plus in liabilities faced by the old company. EclipseJet also proposed to issue $160 million in new notes and offer a 15 percent equity stake in the new company to senior secured creditors.

ETIRC Aviation, the largest shareholder of Eclipse, could not successfully arrange for financing to complete the deal, according to the filing by the Ad Hoc committee representing the senior secured creditors. That committee consists of Kings Road Investments Ltd., HBK Services LLC and Citadel Investment Group LLC.

The committee said in its filing that “there is no reasonable likelihood of rehabilitation” through the Chapter 11 proceeding because Eclipse Aviation and its debtors are administratively insolvent and the sale of debtors’ assets to EclipseJet hadn’t closed because that company could not obtain the requisite financing.

Eclipse furloughed its remaining 800 employees on Feb. 18 because of the delays in financing negotiations. At that time, however, the company said it was a temporary move and it expected the deal to close and affected employees to return to work.

Information: Click here for original article in The New Mexico Business Journal.