Van's Aircraft reports progress toward reorganization

The company, which filed for Chapter 11 bankruptcy protection in December, announced January 20 that “65 percent of eligible kit orders have been renewed at the adjusted price,” reported to be about 30 percent higher than the price originally agreed to, though at least one customer has reported a much higher number—a 54-percent increase over the agreed-upon price for an RV–10 kit, according to a court filing submitted by that customer.

Hundreds more have filed claims, while the company has shipped nearly 100 kits to customers who agreed to pay higher prices. The company has been serving contract-related notices to about 4,800 customers who had paid deposits on products not yet delivered at the time of the bankruptcy filing, and has estimated that 70 percent of those contracts (many customers purchased multiple kits) would need to be updated with new, higher pricing to facilitate a successful reorganization. A detailed plan for that reorganization is due to the court in early March, and will be subject to review and court approval. (Creditors, including customers, will have an opportunity to vote on accepting or rejecting the reorganization plan after it is filed, though a final decision will be made by the judge.)

Weather that closed the company offices for three days in January delayed work finalizing offers still to be made to hundreds of customers who ordered engines, avionics, or propellers supplied by other manufacturers along with their aircraft kits, the company noted in the latest online update: “The planning that is currently underway includes a look at scheduling, lead times, payments, pricing, customer deposits, and more. We are working to have our plans shared by the end of next week with those customers who have open orders for engines, propellers and avionics kits.”

Another group of more than 1,800 customers has been or will soon be notified of which laser-cut parts were included in their purchase, and what options they have. The laser-cut parts issue has been costly for the company, which conducted extensive testing and determined that the cracks found in dimples around laser-cut holes in parts made by an outside vendor do not compromise the part’s integrity or service life. Many customers have requested replacements, and the company, after initially offering to replace all such parts, has determined it would selectively offer replacements, depending on the loads to which a given part was subjected.

“These individual communications will ramp up over the next several weeks. All affected customers will be sent an email containing an individualized list of affected parts for each kit they have received,” the company reported on the laser-cut parts issue. “These part lists are specific to each customer kit, based on inventory on the date that specific kit was packed for shipment. Along with that communication each customer will have the opportunity to select which parts they wish to receive as replacements, and view the associated costs where applicable.”

More than 250 creditors, many if not most of them customers, based on the dollar values, had filed claims in the case as of January 24, according to the online docket that also includes court documents, transcripts, and instructions on how to file a claim. A February 12 deadline has been set by the court to file claims, though Van's has extended that deadline for customers being offered a chance to pay higher prices for their purchases, telling the court it will allow each customer at least 30 days to file a claim if the new pricing is rejected, and join the pool of unsecured creditors who will need to wait for months, at least, to learn how much money they will recover.

One customer, Stephen Allcock of Maryland, filed an objection with the court to the company's move to reject existing customer contracts pending acceptance of new pricing. Allcock’s January 22 filing notes that he received the letter with just over a week to consider the new terms being offered for the $68,476 RV–10 kit that he had paid for in full, at the company's request, in July. In addition to objecting to the tight deadline, Allcock argued that he, as a customer who has paid in full, should be treated differently:

“I am objecting on the basis that I am a fully paid-up customer and not someone with just a deposit with [Van’s Aircraft]—I believe that this should allow the court to consider my case differently as I do not owe any further money based on a legally binding contract from [Van’s] with myself for the purchase of kits,” Allcock wrote. “To be clear—I do want to continue building the airplane and I am hoping to continue to do so at the previously agreed price as I am a fully paid up customer but if for some reason my logic does not work for the court then I will reluctantly proceed with the additional funding request from [Van’s Aircraft] when I can afford to find the additional $36,889.06. This is a request from [Van’s Aircraft] to increase my purchase price by 53.8 [percent]—an outrageous ask in my opinion.”

While the judge has not yet ruled on Allcock’s objection, bankruptcy law typically allows debtors, such as Van’s Aircraft, to reject contracts that have not been completed, which generally leaves the other party to the contract with an unsecured claim for damages for the breach of the contract. Company officials cited a longstanding practice of selling kits for less than they cost the company to produce among the factors that precipitated the bankruptcy.