Virgin Orbit files for Chapter 11 protection

June 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2023 Issue

As a result of its failure to secure long-term investment, responsive space launch provider Virgin Orbit Holdings, Inc. along with its US subsidiaries, has filed for Chapter 11 bankruptcy protection in order to effectuate a sale of the business.

The Chapter 11 filing comes after the company’s sixth mission in January, in which its centrepiece LauncherOne rocket – the first rocket launch out of the UK – failed to reach orbit and crashed into the ocean.

Following the rocket failure, Virgin Orbit struggled to find new funding, halted operations and furloughed nearly all its employees in March in a bid to conserve cash. In April, the company stated that it intends to layoff around 85 percent of its 750 employees.

“While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business,” said Dan Hart, chief executive of Virgin Orbit. “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.”

“I am grateful and proud of every one of our teammates, both for the pioneering spirit of innovation they have embodied and for their patience and professionalism as we have managed through this difficult time,” he continued. “My thoughts and concerns are with the many talented teammates and friends now finding their way forward who have been committed to the mission and promise of all that Virgin Orbit represents.”

To help fund the process and protect its operations, Virgin Orbit has received a commitment from Virgin Investments Limited for $31.6m in debtor-in-possession (DIP) financing. Upon approval from the bankruptcy court, the DIP financing is expected to provide Virgin Orbit with the necessary liquidity to continue operating as it furthers the marketing process commenced pre-petition to sell the company and seek a value-maximising transaction for the business and its assets.

In addition, Virgin Orbit has filed customary motions requesting that the court authorise the company’s ability to its use cash on hand and access the DIP financing to support this process, including payment of remaining employee wages and benefits.

Founded by Sir Richard Branson in 2017, Virgin Orbit operates one of the most flexible and responsive space launch systems ever built. The company began commercial service in 2021, and has already delivered commercial, civil, national security and international satellites into orbit.

“The team at Virgin Orbit has developed and brought into operation a new and innovative method of launching satellites, introducing new technology and managing great challenges and great risks along the way,” added Mr Hart. “We proved the system and performed several successful space flights – including successfully launching 33 satellites into their precise orbit.”

The company has stated its commitment to paying its suppliers and vendors as it tries to find a buyer that will be able to continue to fulfil their needs.

Representing Virgin Orbit as restructuring counsel is Latham & Watkins, with Young Conaway Stargatt & Taylor, LLP as local restructuring counsel, Alvarez & Marsal as restructuring adviser and Ducera as investment banker.

“I am confident of what we have built and hopeful to achieve a transaction that positions Virgin Orbit and its technology for future opportunities and missions,” concluded Mr Hart. “At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalise an efficient and value-maximising sale.”

Fraser Tennant