Van's Aircraft cleared to exit bankruptcy

Judge David W. Hercher of the U.S. Bankruptcy Court for the District of Oregon presided over a 48-minute proceeding to go over a few details in a proposed court order—and confirm that various parties had withdrawn their objections—before confirming a reorganization plan more or less as it was first presented to the court in April and subsequently approved by the overwhelming majority of creditors.

Company founder (and chief rescuer) Richard "Dick" VanGrunsven was present in the courtroom as attorney Timothy Conway spoke on the company's behalf, responding to an objection from one of the hundreds of affected customers who sought to improve terms already approved by other creditors in similar situations.

The customer asked to extend the term and increase the total amount of repayments to be made to customers who rejected the company's offer to fulfill their order at a higher price. Most of the customers in this situation voted overwhelmingly in favor of the plan—88 percent of all individuals in that general group of unsecured creditors, representing 93 percent of the funds owed to their class, voted to approve the plan as presented, court records show.

Other creditors, including manufacturers and other vendors, also accepted less than full repayment and voted to approve the plan, Conway noted, adding that his client (Van's Aircraft, the debtor in the case) "could have proposed a plan that paid creditors absolutely nothing and still have been confirmed," given the provisions Congress wrote into the bankruptcy code. Conway said the individual customer's stated "concern is understandable," given the fact that customers had been forced to wait for weeks to learn the new terms they would be offered as Van's Aircraft rejected hundreds of purchase agreements. Conway said the customer who expressed his grievance during the hearing "got treated like everybody else in the same situation."

Another objection from the U.S. trustee, who had sought to extend the repayment period, was withdrawn without commentary during the hearing, and the proceeding closed with Hercher stating that if the proposed order is presented as discussed, "I'll be prepared to sign it."

That expected signature, which confirms the Chapter 11 plan, completes a relatively speedy journey from crisis to a fiscal reboot, with Van's Aircraft able to continue making affordable, capable kitplanes in quantity—nearly 12,000 produced to date, and counting.

AOPA Pilot Protection Services attorney Jeremy Browner—whose experience in bankruptcy law was brought to bear on behalf of members who are also Van's Aircraft customers, and who sought counsel regarding the options available to them—said the outcome matched the company's stated goals exactly, and the 83-percent acceptance rate of higher prices by customers who agreed to amended contracts during the bankruptcy process is noteworthy, as was the lack of significant objections from creditors.

"They successfully navigated the bankruptcy process," Browner said, noting that the general aviation community shared the prevailing view that Van's Aircraft deserves to survive its financial crisis, and that the firm's long-term health is good for GA. "Assuming that public sentiment stays on their side, and they continue to provide a quality product, they will stay in business. It's exciting, honestly."

Conway called the 83-percent acceptance rate by customers who agreed to complete their purchases for higher prices "astonishing," telling the court it is "hard to get 83 percent of people to do anything when money is involved."

Upon Hercher's promised signature, the Richard E. and Diane E. VanGrunsven Trust owns the company, in exchange for writing off more than $7 million that was loaned to the company by the trust—loans that were secured by company assets—before and after the bankruptcy petition was filed. Another $8.8 million of company operating revenue will be repaid to creditors over the three-year life of the plan. That, with the loans forgiven in exchange for equity, brings the total benefit for creditors to $15.8 million, Conway said. Regarding the customer's objection, he added, "There is no ill will. The company was always acting forthright and as honestly as possible with all of its creditors."

The reorganization plan prioritizes the first $3,350 of each customer deposit, to be repaid immediately, with an estimated 55 percent of any remaining balance on the claim to be repaid over the coming three years, meaning the 235 customers who paid deposits and later rejected proposed price increases on 429 orders (representing 17 percent of all unfilled orders at the time of the bankruptcy filing) will be repaid up to $3,350 of their deposits in full; those whose deposits and claims exceed that amount will eventually be repaid a little more than 55 percent of what the company owed them at the time of the bankruptcy.

Browner noted that this depends in part on the claims being filed correctly, with information included to establish the priority status of the first $3,350 of a claim related to a deposit. Confirmation of the plan all but closes the door on amending claims, though customers may still want to have an attorney review their claim in case there are grounds to amend it that the court will accept.

The court-approved plan stipulates that the company will continue building eight kitplane models, a factory-built option, and a forthcoming backcountry airplane, details of which have not yet been released.