Judge approves $40 million Eclipse purchase
ALBUQUERQUE, N.M. — A federal bankruptcy judge on Thursday approved a $40 million offer to purchase Eclipse Aviation, giving the Albuquerque-based manufacturer a chance to restart production of its light jet.
Mason Holland Jr. of Charleston, S.C., the new chairman and president of Eclipse Aerospace, said he expects the company to reopen its doors debt-free on Sept. 1, though on a smaller scale than its predecessor.
“The old Eclipse was a great company. They made a great product, but the fatal flaw was they focused on growth first and profit second,” Holland said. “We’re going to focus on profitability first and growth second.”
The new company will do business as Eclipse Aviation but has no immediate plans, given the current economy, to restart production of the Eclipse 500, which has been likened to an SUV with wings.
Eclipse Aviation Corp. shuttered its jet-making plant in February, putting 800 employees out of work.
When the new company opens its doors next month, it will employ 15 managers and key engineers, Holland said.
Holland envisions 500 to 600 employees producing several hundred jets each year, but Albuquerque Mayor Martin Chavez said the company represents more than just jobs.
“Eclipse is a symbol for the city of Albuquerque,” Chavez said. “I am so delighted in its rebirth, the fact the community was able to snatch victory from defeat.”
Within about six months, Holland plans to employ several hundred people and once the economy recovers and the company becomes profitable, he plans to restart production.
“They believe they can make money,” Chavez said.
Mike Press of Chesterfield, Mo., who co-founded the new company with Holland and is its executive vice president, said revenue will come from $100,000 to $500,000 worth of upgrades on each of the 259 jets produced. The owners will be charged for the upgrades, though Press said prices have not been set. A Chicago-based service center began upgrading aircraft in June.
“We’re going to price it with some profit, but we’re not going to gouge the owners,” he said. The former Eclipse firm had told owners it would do the upgrades free of charge.
Holland said the company also plans to buy back aircraft from owners and fleet operators and refurbish them for resale.
Press said the new company will examine products manufactured by Eclipse that they can market. Among the assets is a patent on a non-ozone depleting fire suppression system, which could be marketed to other jet manufacturers.
Holland, founder of Benefitfocus.com, Inc., which employs 500 people in South Carolina, was a 60 percent deposit holder of an Eclipse 500 that was never delivered. He turned from pursuing litigation against Eclipse’s former owners to buying the company after he and Press — a retired Air Force colonel, former Northrop Grumman executive and light jet broker — met with Eclipse customers.
“We went to 27 cities in 15 days and we met with over 300 owners and deposit holders of Eclipse aircraft,” Holland said. “Every single pilot and owner, unanimously, loves the plane. That’s why we decided to buy the company.”
Eclipse’s troubles came to light beginning in July 2008 when its founder and chief executive, former Microsoft executive Vern Raburn, was ousted in a management shake-up. A month later, the company laid off nearly 40 percent of its work force and last fall failed to make payroll.
Eclipse entered Chapter 11 bankruptcy proceedings in November.
A federal bankruptcy judge approved the sale of Eclipse to its largest shareholder, ETIRC Aviation, in January. When financing failed to materialize by February, the company went into Chapter 7 liquidation.
Former Eclipse executives blamed the manufacturer’s downfall on the recession, but analysts criticized its business model as flawed by failed promises to produce a high volume of jets at low cost.
Holland says the days of over-promising and bad press for Eclipse are finished.
“No big promises, just good core business,” he said.