Court approves Icon Aircraft sale
Flurry of bids culminates in agreement
A last-minute flurry of bids from a German sewing machine maker and Linden Blue, co-owner and vice chairman of General Atomics—the makers of Predator drones—culminated June 18 with a bankruptcy judge signing off on the sale of Icon Aircraft for a fraction of what it might once have been worth.
Icon Aircraft filed for Chapter 11 bankruptcy protection in April, seeking a buyer for the company's assets including its California headquarters; manufacturing facility in Tijuana, Mexico; and a facility in Florida. The terms approved by Judge Craig Goldblatt include a purchase price of $15.79 million for all of the company's assets.
Minority shareholders including company founder Kirk Hawkins, who sued Icon's majority owner, Pudong Science and Technology Investment Co. Ltd., in Delaware state court in 2021 challenging an alleged "expropriation of … intellectual property in aircraft design, aircraft manufacturing, and advanced carbon-fiber structures manufacturing to China," withdrew an objection to the sale. Attorney Sean Mitchell, representing those shareholders, told the court June 18 that revisions to the sale agreement preserve his clients' rights to continue to pursue their claims, and that negotiations between those parties are ongoing. He added that if those negotiations fail to produce an agreement, his clients may return to the bankruptcy court seeking an order allowing them to proceed with pre-petition claims.
The hearing lasted just under 30 minutes, most of that time taken up by debtor's attorney Charles Persons, who recounted a flurry of eleventh-hour offers and counteroffers between his client and two bidders: SG Investment America, Inc., the original "stalking horse" bidder, and Blue, who had ultimately offered two prices: $15.79 million for all Icon assets, or $15.54 million excluding license to the company's intellectual property in China.
Persons told the court that Icon did not have enough cash remaining to extend the bankruptcy auction, and the $15.79 million bid from the "German company" that made the original $13 million offer to open the auction was preferred based on terms and the "certainty" it offered. He also noted that the preferred bidder would require at least six days to consider countering any further offer from Blue.
"We don't have a week to reopen the auction and try this again for what we don't imagine is a significant additional amount of money," Persons said. "The debtors burn, on average, upwards of $750,000 to $850,000 a week right now, and liquidity is extremely tight. We forecast that we would run out of liquidity by the end of the first week of July. Any further delay in closing past the July 2 date is simply unsustainable for the debtors at this time."
Court documents show that one of Icon's largest creditors has been repaid: East West Bank of El Monte, California, which loaned the company more than $60 million at various times prior to the bankruptcy filing, has been repaid those secured claims and its counsel withdrew from the proceedings. Of the remaining $105 million in various unsecured loans Icon owed, the vast majority—$93 million, according to court documents—was loaned to Icon by the same company that had acquired more than half of the company's equity in the years leading up to the bankruptcy. The most recently revised liquidation analysis in the case indicates unsecured creditors will be repaid less than a penny on the dollar once the $15.79 million sale is complete.
According to court documents, Blue will retain his status as a "backup" bidder into September, and could be invited to close the sale if the deal with SG Investment America is not consummated quickly.
Founded in 2006, Icon delivered its first A5 amphibious light sport aircraft in 2016, and 209 more have followed according to General Aviation Manufacturers Association data. According to published reports, SG Investment America is owned by a 160-year-old German manufacturer of sewing machines, Dürkopp Adler GmbH, which is, in turn, owned by ShangGong Group of Shanghai, China, which also makes sewing machines.
Mitchell told the court his clients are satisfied that the revised sale agreements preserve their ability to continue to seek damages under their ongoing state court litigation.
"Our clients are of course disappointed the company has been driven to this point," Mitchell said. "The unfortunate reality is that much of the value of this company was lost in the years prior to the sale, and to these Chapter 11 cases by virtue of the conduct which is at the heart of the derivative litigation. But we are where we are today."
The revised terms of a transaction now required to close within days include provisions for all Icon staff to be terminated, and then offered jobs with the new company, at the new owner's discretion, subject to negotiation of terms and compensation with each employee.
