Fairchild-Dornier to file for insolvency

[xmp]

FinancialTimes (http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT329S60JZC&live=true&tagid=IXLUCLOJQBC):

Aircraft group poised to file for insolvency
By Gerhard Hegmann in Munich
Published: April 2 2002 02:08 | Last Updated: April 2 2002 02:11

Fairchild Dornier, the US-German regional aircraft maker, is poised to file for insolvency on Monday as talks with possible investors have not yet yielded results and it is running short of liquidity, sources close to the company said.

Through the insolvency procedure, Fairchild Dornier could be better positioned to acquire a strategic investor and might be sold for a symbolic price, the sources said. Prior takeover talks failed because of different ideas about the company's price, among other reasons.

Fairchild Dornier has called an extraordinary meeting with its 3,600 employees at its German base, Oberpfaffenhofen, near Munich, for this afternoon.

The aircraft maker declined to comment on its financial situation, saying merely that "there had been talks with possible partners during the Easter holidays".

The company confirmed in March that it was in need of a strategic partner to see through the development of its new 728 model. The world's third largest producer of regional aircraft after Bombardier of Canada and Embraer of Brazil is owned 71 per cent by Clayton Dubiler & Rice, a US venture capital group, and 24 per cent by Allianz Capital Partners, a unit of the German insurance group Allianz.

Six years ago, Dasa, the German aviation group that later merged into EADS, the European defence and aviation joint venture, sold Fairchild Dornier, including debt to its current investors, for the symbolic sum of $1.

This spring, the two main investors negotiated a package of $870m with Fairchild Dornier, which included a government-backed loan of $345m. However, delivery of this package was put on ice when it became clear a further investor was needed to save the company.

Chuck Pieper, chief executive, admitted two weeks ago that Fairchild Dornier was in "critical" condition. The state government of Bavaria has been actively involved in trying to rescue the company, as its collapse would damage the image of Edmund Stoiber, Bavarian prime minister and challenger to Gerhard Schroder, chancellor, in Germany's general election.

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Sad to see just weeks after the first 728-100 had its roll-out.

[Alas para Volar]

Now confirmed as true

[Captain104]

Latest news:
A meeting of parties involved ( CEO, employees, Bavarian state government authorities, most importent banks and credit lenders) just ended.

They are still looking for a strategic investor but sufficient capital is available to continue production in the next 3 month. Insolvency is more a tactical move to gain a potential investor. (Boing and EADS in STBY)
Insiders say that human capital of Dornier-Fairchild (3600 employees in Germany, +1000 in US) belongs to the finest in this field worldwide and that is a known factor. Orders for more than 11 billion USD in the books. :)

[PaperTiger]

Got to admire their perseverance though.
Lost a bundle on the 228. Ditto 328. The 328Jet seems to be popular, but perhaps a loss-leader ? And all that 728 development cost for nought ?

Gone, I'd say.

[railwaysengineer]

Sorry, PaperTiger, cannot feel with you. To understand the process of an insolvency in Germany you have to have a deep understanding of the legal process itself and the very strong position of the official receiver, who overtakes the business completely in this case. He will continue the business, starting with "rehiring" the staff he needs for that. The salary of the employees will be paid from an "insolvency cashier" (for three month, I guess), if there is no more money on the bank accounts for that. Salary has always the highest priority in paying the debts. That is to use every chance (and earn time for that) to continue the business with another investor. In my business I´ve monitored several insolvencies of companies of much less importance than Fairchild/Dornier, and all continued at the end, more or less changes within the structures and so on, ok, but it worked at the end. There is a good chance for Fairchild/Dornier.

[Captain104]

railwaysengineer

Well said.
I am surprised once again by this highly qualified comment and thats what makes me enjoy PpruNe every day. :)

[PaperTiger]

$90m loan secured. How long will this last them ?
http://biz.yahoo.com/djus/020417/200204171011000651_1.html

[Volume]

Aviation Daily: GECAS Cancels Order For 50 Fairchild Dornier 728s

By Jens Flottau and Sean Broderick/Aviation Daily

18-Apr-2002 12:30 PM U.S. EDT

GE Capital Aviation Services (GECAS) is stepping back from its order for the Fairchild Dornier 728 regional jet.
A GECAS spokesman confirmed to The DAILY, "We have notified Fairchild Dornier that we have canceled our order according to the terms of our agreement."
He noted that "the uncertainty surrounding the situation" was too great to keep the contract on the books.
GECAS had ordered 50 728s, plus options for an additional 100 aircraft, for a total list value of $1.5 billion.
The cancellation is the first following Fairchild Dornier's filing of insolvency earlier this month.
It could be a fatal blow to the company, since GECAS was the biggest customer for the aircraft when counting firm orders and options.

GECAS also was the second biggest in terms of firm commitments.
Lufthansa CityLine has ordered 60 728s plus 60 options.
The company said that despite FD's difficulties, Lufthansa remained committed to the program and did not consider getting out of the contract. The timing of GECAS' move could not be worse.
FD has to find an investor by the end of June if the company is to stay in existence.
A collapse of the 728/928 program would leave Brazilian rival Embraer as the only manufacturer with a newly developed range of 70- to 110-seaters.

Bombardier has stretched the original CRJ100 twice to develop the CRJ700 and CRJ900. Sources close to Lufthansa said the airline was likely to switch to Embraer if the 728 was stopped. CityLine operates a fleet of CRJ100/200s and CRJ700s, but it is looking at BAE Systems Avro 85 replacements as well.
Industry sources said Lufthansa does not consider the CRJ900 a viable alternative.
The GECAS spokesman said that even though the company canceled this order, "we continue to believe that the 728 is an attractive aircraft." He did not rule out that the leasing company might come back with a new order once FD's future is clarified.

"We are willing to leave the door open to discuss a new contract with them," he said.
CSA Czech Airlines last year bought eight 728s, four from FD and four from GECAS. Sources say GECAS has told CSA that it will not get the 728s.

FD rolled out the first 728 in late March but filed for insolvency April 2. First flight, scheduled for May, was pushed back until at least August. FD said yesterday that it continued final assembly on prototypes.


sad but true, this is the end of the 728 project in my oppinion
:(

[The Baron]

It would be a disaster if the 728/928 family were scuppered. From what I've seen this is the best aeroplane in it's class by miles. It would be incredibly stupid if the 2 heavilly protected and inferior jet manufacturers were left to divide the market.

[B772]

I have heard a 'whisper' Airbus Ind may indicate some interest in some parts of Faidor in the very near future.

[Kerosene Kraut]

@Triple Seven:
That will only be parts manufacturing subcontracting work for Airbus, certainly no regional business production. If somebody is to buy them it might only be Boeing. Hope FD survives.