Virgin Orbit is scrambling to keep away from chapter as deal talks proceed

Virgin Orbit’s LauncherOne rocket on display in Times Square, New York.

CNBC | Michael Sheetz

Virgo 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 maker suspended operations last week and furloughed most of the company, CNBC first reported, while it looked for new investments or a possible acquisition.

Virgin Orbit CEO Dan Hart and other senior executives held daily meetings throughout the weekend with interested parties, according to people familiar with the matter, who asked not to be identified to discuss internal matters.

During an all-hands meeting last week, Hart told employees the company hopes to provide an update on the situation as early as Wednesday.

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

While a door remains open to avoid bankruptcy, those close to the situation describe a sense of panic as the company struggles to close a deal. A potential buyer turned down a proposed sale price of nearly $200 million, one person told CNBC — a price just under the company’s market value as of Friday’s close.

At the same time, Virgin Orbit is preparing for a possible bankruptcy filing later this week, one person said. Virgin Orbit hired two firms — Alvarez & Marsal and Ducera Partners — to draw up restructuring plans in the event of bankruptcy, CNBC learned. Sky News first reported the companies had been shut down.

A Virgin Orbit spokesman declined to comment.

Virgin Orbit shares have continued to fall since the pause in operations, with the stock slipping to close at $0.52 a share on Monday.

The company developed a system for sending satellites into space that uses a modified 747 jet that ejects a missile under the plane’s wing mid-flight. Its final mission suffered an in-flight failure and its rocket failed to reach orbit.

Richard Branson’s Virgin Orbit, with a rocket under the wings of a modified Boeing 747 jet, lifts off from Mojave, California on July 10, 2019 for a major drop test of its high-altitude satellite launch system.

Mike Blake | Reuters

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

But the company is struggling to shore up its coffers. It went public in December 2021 just before the end of the SPAC madness and was unable to enter the fundraising markets in the same way as its sister company Virgin Galactic, which was increasing its cash reserves through stock and debt sales than $1 billion topped up.

Virgin Orbit sought to raise $483 million through its SPAC litigation, but significant redemptions raised less than half of that, raising gross proceeds of $228 million. The funds it could raise came from Boeing and AE Industrial Partners, among others.

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Virgin Orbit has been searching for a financial lifeline for several months. Branson was unwilling to continue funding the company, sources said, and instead shifted its strategy to value preservation.

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

George Mattson, who sits on Virgin Orbit’s board of directors, 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 valuation of $3.7 billion.

Virgin Orbit said in a filing filed Monday that it has approved a severance plan for top executives if they are terminated “following a change of control” of the company. The plan covers Hart, as well as Chief Strategy Officer Jim Simpson and Chief Operating Officer Tony Gingiss, and includes payout of base salary and annual bonuses. If fired, Hart would receive cash compensation equal to 200% of his base salary, or $511,008, according to FactSet.

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