Virgin Orbit’s DIP financing draws objection from creditors committee

By Sarah Lizee

Olympia, Wash., April 27 – Virgin Orbit Holdings, Inc.’s proposed $74.1 million debtor-in-possession facility drew an objection from the official committee of unsecured creditors, according to documents filed Wednesday with the U.S. Bankruptcy Court in the District of Delaware.

As previously reported, the financing is from parent company Virgin Investments Ltd. (VIL).

The facility consists of a $31.6 million new money super-priority senior secured term loan and a $42.5 million rollup of prepetition convertible notes.

“VIL and the debtors are proposing expensive DIP financing that improperly and inequitably benefits VIL and hamstrings general unsecured creditors – it dictates an extremely limited and time-constrained sale process and imposes substantial limitations on the committee’s ability to garner a recovery for unsecured creditors and properly wind down the debtors’ estates,” the committee said in its objection.

The committee noted that the proposed DIP facility mandates a bid deadline 14 days after the bidding procedures hearing and requires the debtors to obtain simultaneous approval of a disclosure statement for a plan of reorganization.

The DIP budget contemplates the debtors having only $8,000 in cash by June 30, and contains no funding for a wind-down, inadequate funding for committee professional advisers and no room to maneuver on the timeline, the committee said.

This problem is exacerbated by VIL’s insistence on a cash sweep to repay the DIP should the debtors’ cash-on-hand at any time exceed the projected amount by at least $2 million, the committee added.

“The tight cash position leaves little margin for error and thus seems designed to preclude the pursuit of opportunities with qualified buyers who may require more time to complete their diligence, unless permitted by VIL in its discretion,” the committee said.

The group said the DIP also contains numerous provisions calculated to benefit VIL at the expense of unsecured creditors, including the rollup (at a ratio of 1.34:1, but 1.55:1 excluding DIP severance new money loans, which may end up never being provided), the raised interest rate on the rollup, and the 3% commitment fee on $10.9 million of the rollup.

The provisions also include liens and super-priority claims on the proceeds of avoidance actions that should be reserved for unsecured creditors, and an inadequate investigation budget, the committee added.

Long Beach, Calif.-based Virgin Orbit operates space launch systems. The company filed bankruptcy on April 4 under Chapter 11 case number 23-10405.

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