Virgin Orbit scrambles to avoid bankruptcy as talks continue

pristine orbit is scrambling to secure a funding lifeline and avoid bankruptcy, which could come as soon as this week without a deal, CNBC has learned.

The rocket builder suspended operations last week and furloughed most of the business, as CNBC first reported, as it sought new investment or a potential takeover.

Virgin Orbit CEO Dan Hart and other top executives met daily with interested parties throughout the weekend, according to people familiar with the matter, who asked to remain anonymous to discuss matters. internal.

At a town hall meeting last week, Hart told employees the company hoped to provide an update on the situation as early as Wednesday.

Meanwhile, top talent is already entering the job market: many of Virgin Orbit’s approximately 750 employees are looking elsewhere for vacancies. According to a CNBC analysis, this talent ranges from executives to senior and principal engineers to program managers who are actively seeking and finding new jobs.

As a door remains open to avert bankruptcy, people familiar with the situation describe a sense of panic as the company scrambles to reach a deal. A potential buyer balked at a proposed sale price of nearly $200 million, one person told CNBC — a price just below the company’s market value at Friday’s close.

At the same time, Virgin Orbit is preparing for a possible bankruptcy filing as soon as this week, one person has said. Virgin Orbit has hired a pair of firms – Alvarez & Marsal and Ducera Partners – to develop restructuring plans in the event of insolvency, CNBC has learned. Sky News announced for the first time that the companies had been hired.

A Virgin Orbit spokesperson declined to comment.

Shares of Virgin Orbit have continued to fall since it paused trading, with its stock slipping nearly 50 cents per share in Monday’s trading.

The company has developed a system for sending satellites into space that uses a modified 747 jet, which drops a rocket under the plane’s wing in midair. His last mission suffered a mid-flight failure and his rocket failed to reach orbit.

The company spun off from Richard Branson Galactic Virgo in 2017 and counts the billionaire as its largest shareholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second largest stake in Virgin Orbit, at 18%.

But the company is struggling to maintain its coffers. It went public in December 2021 towards the end of the SPAC craze and hasn’t been able to tap markets for fundraising in the same way as its sister company Virgin Galactic, which has grown its cash reserves to over $1 billion through the sale of stocks and debt.

Virgin Orbit was aiming to raise $483m through its SPAC process, but significant buyouts meant it raised less than half that, grossing $228m in gross proceeds. The funds he managed to raise came from Boeing and AE Industrial Partners, among others.

Virgin Orbit had been looking for a financial lifeline for several months. Branson was unwilling to finance the company further, people familiar said, and instead shifted his strategy to value recovery.

Since the fourth quarter, Virgin Orbit has raised $60 million in debt from Branson’s Virgin Group investment arm, giving it priority over Virgin Orbit assets. Around the same time, Virgin Orbit hired Goldman Sachs And Bank of America to explore other financial opportunities, ranging from a minority investment to a full sale.

George Mattson, who sits on Virgin Orbit’s board, was heavily involved in the company’s sale process, people told CNBC. Mattson spent nearly two decades as a banker at Goldman Sachs, before co-founding the SPAC called NextGen, which took Virgin Orbit public at a $3.7 billion valuation.

Virgin Orbit revealed in a filing on Monday that it has approved a departure plan for senior executives, if they are made redundant “following a change in control” of the company. The plan covers Hart, as well as chief strategy officer Jim Simpson and chief operating officer Tony Gingiss, and includes the payment of base compensation and annual bonuses. If terminated, Hart would receive a cash severance package equal to 200% of his base salary, which is $511,008, according to FactSet.