TECT Aerospace Group Holdings, Inc.
FILING ALERT: Hurt by Grounding of Boeing 737 MAX and Spirit Contract Cancellation, TECT Aerospace Files Chapter 11 in Delaware to Sell Assets; Boeing to Serve as DIP Lender
Tue 04/06/2021 08:24 AM
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing
TECT Aerospace Group Holdings, Inc., a Wichita, Kan.-based manufacturer of high precision components and assemblies for the aerospace industry, filed for chapter 11 protection on Monday night in the Bankruptcy Court for the District of Delaware, along with several affiliates. The company reports $50 million to $100 million in assets and $100 million to $500 million in liabilities. The debtors are represented by Richards, Layton & Finger as counsel, Winter Harbor as restructuring advisor and Imperial Capital as investment banker. KCC is the claims agent. The case number is 21-10670. The case has been assigned to Judge Karen B. Owens. For access to the relevant documents above as well as our First Day by Reorg team's coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities including the TECT Aerospace chapter 11 filing Request a Trial here.
According to the first day declaration of Winter Harbor co-founder and managing partner Shaun Martin, who serves as the debtors’ CRO, the debtors are in the process of marketing their assets “and are hopeful that this process will result in an executed asset purchase agreement or agreements that will allow the Debtors to sell all or a portion of their assets in the near term pursuant to section 363 of the Bankruptcy Code.” The debtors are seeking $60.2 million of DIP financing from Boeing, with $22 million sought in funding on an interim basis. “The DIP Facility will provide the funding necessary for the Debtors to continue their operations through the sale processes and to pay expenses attendant to these chapter 11 cases,” the debtors say.
The debtors’ prepetition capital structure includes:
The prepetition revolving credit agreement was acquired by Boeing from PNC Bank (as agent) in February 2021.
The company attributes its financial struggles to the FAA’s grounding of Boeing 737 MAX airplanes, which accounted for 35% of the debtors’ revenue in 2019, and the “unprecedented economic impact” of the Covid-19 pandemic on the aviation industry.
In default under its obligations to their affiliated creditors, in March 2020, the debtors, Boeing, the affiliated creditors, PNC and other important customers commenced discussions regarding strategic alternatives for addressing TECT’s financial distress, leading to the parties to explore the option of a sale of TECT’s Kansas assets to non-debtor affiliate NWI Aerostructures, but the parties ultimately failed to reach an agreement. The debtors continued their exploration of out of court options through December 2020, but these efforts were stymied when Spirit notified the debtors that it was terminating its supply agreement with them.
After initial negotiations between the parties failed, TECT continued evaluating a number of alternative paths forward. In February 2021, Boeing purchased the debt under the prepetition credit agreement and notified the debtors that it would not continue funding under the agreement absent a chapter 11 filing. The forbearances offered by the affiliated creditors ultimately gave the debtors until April 9 to finalize DIP financing arrangements with Boeing and prepare for the chapter 11 filing.
The debtors launched a prepetition marketing process with Imperial Capital in March 2021 but have not entered into any agreements with respect to a sale of the debtors’ assets.
Recognizing that a likely bidder for certain of TECT’s Kansas assets may be NWI or another affiliate of the debtors, the board of directors of TECT Aerospace Kansas Holdings, LLC and TECT Aerospace Holdings, LLC established a special independent committee of each board to review, evaluate, negotiate, approve and execute any transaction involving the debtors, on the one hand, and one or more affiliates of the debtors and any other related party, on the other hand. Jean King is the independent director of the boards and the sole member of the special committee.
Holders of TECT Aerospace Group Holdings’ equity include:
The affiliated debtors consist of:
Reorg First Day will provide a full summary once the first day briefing is complete.
Voluntary Petition
First Day Declaration
DIP Financing
TECT Aerospace Group Holdings, Inc., a Wichita, Kan.-based manufacturer of high precision components and assemblies for the aerospace industry, filed for chapter 11 protection on Monday night in the Bankruptcy Court for the District of Delaware, along with several affiliates. The company reports $50 million to $100 million in assets and $100 million to $500 million in liabilities. The debtors are represented by Richards, Layton & Finger as counsel, Winter Harbor as restructuring advisor and Imperial Capital as investment banker. KCC is the claims agent. The case number is 21-10670. The case has been assigned to Judge Karen B. Owens. For access to the relevant documents above as well as our First Day by Reorg team's coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities including the TECT Aerospace chapter 11 filing Request a Trial here.
According to the first day declaration of Winter Harbor co-founder and managing partner Shaun Martin, who serves as the debtors’ CRO, the debtors are in the process of marketing their assets “and are hopeful that this process will result in an executed asset purchase agreement or agreements that will allow the Debtors to sell all or a portion of their assets in the near term pursuant to section 363 of the Bankruptcy Code.” The debtors are seeking $60.2 million of DIP financing from Boeing, with $22 million sought in funding on an interim basis. “The DIP Facility will provide the funding necessary for the Debtors to continue their operations through the sale processes and to pay expenses attendant to these chapter 11 cases,” the debtors say.
The debtors’ prepetition capital structure includes:
- Secured debt:
- Revolving credit agreement: $41.9 million
- Chisholm Trail State Bank equipment loan: $1.25 million
- Unsecured debt:
- Obligations to non-debtor affiliated creditors: $19.7 million
- Ordinary course trade creditors: $35 million, including $17 million owed to Boeing.
The prepetition revolving credit agreement was acquired by Boeing from PNC Bank (as agent) in February 2021.
The company attributes its financial struggles to the FAA’s grounding of Boeing 737 MAX airplanes, which accounted for 35% of the debtors’ revenue in 2019, and the “unprecedented economic impact” of the Covid-19 pandemic on the aviation industry.
In default under its obligations to their affiliated creditors, in March 2020, the debtors, Boeing, the affiliated creditors, PNC and other important customers commenced discussions regarding strategic alternatives for addressing TECT’s financial distress, leading to the parties to explore the option of a sale of TECT’s Kansas assets to non-debtor affiliate NWI Aerostructures, but the parties ultimately failed to reach an agreement. The debtors continued their exploration of out of court options through December 2020, but these efforts were stymied when Spirit notified the debtors that it was terminating its supply agreement with them.
After initial negotiations between the parties failed, TECT continued evaluating a number of alternative paths forward. In February 2021, Boeing purchased the debt under the prepetition credit agreement and notified the debtors that it would not continue funding under the agreement absent a chapter 11 filing. The forbearances offered by the affiliated creditors ultimately gave the debtors until April 9 to finalize DIP financing arrangements with Boeing and prepare for the chapter 11 filing.
The debtors launched a prepetition marketing process with Imperial Capital in March 2021 but have not entered into any agreements with respect to a sale of the debtors’ assets.
Recognizing that a likely bidder for certain of TECT’s Kansas assets may be NWI or another affiliate of the debtors, the board of directors of TECT Aerospace Kansas Holdings, LLC and TECT Aerospace Holdings, LLC established a special independent committee of each board to review, evaluate, negotiate, approve and execute any transaction involving the debtors, on the one hand, and one or more affiliates of the debtors and any other related party, on the other hand. Jean King is the independent director of the boards and the sole member of the special committee.
Holders of TECT Aerospace Group Holdings’ equity include:
The affiliated debtors consist of:
Reorg First Day will provide a full summary once the first day briefing is complete.
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