Item 1.03 Bankruptcy or Receivership
Voluntary Petitions for Bankruptcy
On April 4, 2023 (the “Petition Date”), Virgin Orbit Holdings, Inc. (the “Company”) and its domestic subsidiaries, Virgin Orbit National Systems, LLC, Vieco USA, Inc., Virgin Orbit, LLC and JACM Holdings, Inc. (together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Debtors have requested that the Chapter 11 proceedings be jointly administered under the caption In re Virgin Orbit Holdings, Inc., et al. (the “Chapter 11 Cases”). The Debtors continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The Debtors are seeking approval of a variety of “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations.
Additional information about the Chapter 11 Cases, including access to Bankruptcy Court documents, is available online at https://cases.ra.kroll.com/virginorbit, a website administered by Kroll Restructuring Administration, a third party bankruptcy claims and noticing agent. The information on this website is not incorporated by reference into, and does not constitute part of, this Current Report.
Debtor-in-Possession Credit Agreement
Subject to the approval of the Bankruptcy Court, the Debtors expect to enter into a Senior Secured Superpriority Debtor-in-Possession Term Loan Credit Agreement (the “DIP Credit Agreement”) with Virgin Investments Limited (the “DIP Lender” or “VIL”), substantially in the form attached hereto as Exhibit 10.1.
If the DIP Credit Agreement is approved by the Bankruptcy Court as proposed, the DIP Lender would provide a super-priority senior secured debtor-in-possession term loan credit facility in an aggregate principal amount not to exceed $74.1 million (the “DIP Facility”), consisting of up to $31.6 million in principal amount of new money term loan commitments (the “DIP New Money Loans”) and a roll-up of (a) the senior secured convertible note in the principal amount of $10.9 million (the “New Money Bridge Note”) that was funded prepetition and (b) a portion of the VIL Notes, in each case as described below. Borrowings under the DIP Facility would be senior secured obligations of the Debtors, secured by a super-priority lien on the collateral under the DIP Facility, which includes substantially all of the Debtors’ assets. The DIP Credit Agreement contains various customary representations, warranties and covenants of the Debtors.
The New Money Bridge Note was funded on March 30, 2023 and will be converted into a separate tranche of the DIP Facility on the date on which the Bankruptcy Court issues an Interim DIP Order (as defined below). The New Money Bridge Note bears interest at a rate of 12.00% per annum (or 16.0% upon the occurrence and during the continuance of an event of default), payable monthly in arrears.
Upon the Bankruptcy Court’s entry of an interim order approving the DIP Facility (the “Interim DIP Order”), the DIP Lender will fund $12.25 million of DIP New Money Loans (the “Interim New Money Loans”). Upon the Bankruptcy Court’s entry of a final order approving the DIP Facility (the “Final DIP Order”), the DIP Lender shall fund an additional $15.15 million of DIP New Money Loans (the “Final New Money Loans” and, together with the Interim New Money Loans, the “New Money Loans”). The New Money Loans shall bear interest at a rate of 12.00% (or 16.0% upon the occurrence and during the continuance of an event of default) per annum, payable monthly in arrears.
The DIP Credit Agreement also permits, to the extent necessary, one or more additional fundings in an aggregate principal amount of up to $4.2 million from the DIP Lender, which shall be made available following entry of (A) an order approving severance payments to the Debtors’ employees (a “Severance Approval Order”) and (B) the Interim DIP Order (the “DIP Severance New Money Loans”). The DIP Severance New Money Loans may be drawn in one or more draws, in each case in an amount not to exceed the amount of severance payments due and payable and approved by the Bankruptcy Court (the “Approved Severance Payments”). The DIP Severance New Money Loans are to be used solely for Approved Severance Payments, which may or may not become necessary.
Pursuant to the DIP Facility, a portion of the VIL Notes (as defined below) would also be converted into a separate tranche of borrowings under the DIP Facility (the “Final Roll-Up Loans”), and shall bear interest at 18.00%, payable and compounded monthly in arrears. Additionally, 100% of the interest payable on the Final Roll-Up Loans shall be paid in-kind and added to the principal amount thereof.
The DIP Credit Agreement contains various customary events of default. During the continuance of an event of default, all overdue amounts of principal and interest under the DIP Facility will bear interest at the applicable rate, plus and an additional 4.00% per annum.
Fees and expenses under the DIP Facility include funding fees of (i) 3.00% of the aggregate principal amount of Interim New Money Loans due when issued, (ii) 3.00% of the aggregate principal amount of Final New Money Loans due when issued and (iii) 3.00% of the aggregate principal amount of Severance New Money Loans due when issued.
The DIP Credit Agreement also contains milestones for the progress of the Chapter 11 Cases (the “Milestones”), which include the dates by which the Debtors are required to, among other things, obtain certain orders of the Bankruptcy Court and consummate the Debtors’ emergence from bankruptcy. Among other dates set forth in the DIP Credit Agreement, the agreement contemplates that the Bankruptcy Court shall have entered the Interim DIP order no later than five (5) calendar days after the Petition Date and the Final DIP Order no later than thirty (30) calendar days after the Petition Date.
The foregoing description of the DIP Credit Agreement does not purport to be complete and is qualified in its entirety by the full text of the DIP Credit Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report) and incorporated by reference to this Item 1.03.
Termination and Debrand Agreement; Termination of TMLA
On April 2, 2023, in connection with the Company’s entry into the DIP Credit Agreement with VIL, the Company and Virgin Enterprises Limited (“VEL”) entered into a Termination and Debrand Agreement (the “Debrand Agreement”), pursuant to which the trademark license agreement, dated December 29, 2021, between the Company and VEL (the “TMLA”) was terminated as of April 2, 2023 and the parties agreed to carry out a debranding plan with respect to the marks, rights and other matters subject to the TMLA. Under the terms of the TMLA, the Company possessed certain exclusive and non-exclusive rights to use the name and brand “Virgin Orbit” and the Virgin signature logo.
The foregoing descriptions of the Debrand Agreement and the TMLA do not purport to be complete and are qualified in their entirety by the full text of the Debrand Agreement, a copy of which is attached as Exhibit 10.4 to this Current Report, and incorporated by reference to this Item 1.03, and the full text of the TMLA, which was filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
