Cessna Aircraft Co. has signed a Letter of Intent with Columbia Aircraft Manufacturing Corp. to acquire selected assets and certain liabilities of the Bend, Ore.-based aircraft manufacturer.
Cessna Chairman, President and CEO Jack J. Pelton noted that “Columbia’s unique capability in the high-end single-engine piston market makes it a perfect complement to our Next Generation Piston product line and could provide our customers with the option of an outstanding low-wing, high-performance piston airplane. We believe the combination of this superb product line and Cessna’s world class support structure and brand will be unbeatable.”
In late September, Columbia filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Under Chapter 11, a company’s reorganization plan must be accepted by a majority of its creditors. Unless the court rules otherwise, the debtor remains in control of the business and its assets. The Malaysian government has owned a controlling interest in Columbia since 2002.
According to the filing in U.S. Bankruptcy Court in Portland, Ore., Columbia lists approximately $60 million in unsecured debt to thousands of creditors.
In a media release, Columbia officials said the bankruptcy was the result of a series of unanticipated events over the past year that hampered the company’s ability to deliver aircraft, resulting in a disruption of cash flow. Among these events was a delay in the certification program for the G1000 avionics suite and a freak hail storm that damaged 67 aircraft that were awaiting certification. Last month the company took another hit and was forced to furlough some 300 employees when there was an issue with a component of the G1000 that led to the production line grinding to a halt until Garmin fixed the problem.
“We have explored many options over the past months,” said Columbia Chief Restructuring Officer Carl Young. “This path enables the company to manage its present cash flow and liabilities while pursuing a plan that enables us to continue operating until a final sale can be completed.”
Columbia submitted a motion with the bankruptcy court seeking approval of the sale to Cessna and establishing bidding procedures that enable other interested bidders to submit offers and bid at an auction to be held in November. The sale to Cessna is contingent upon the approval of the bankruptcy court and the satisfaction of the closing conditions set forth in the Letter of Intent, including the execution of a definitive purchase agreement with Cessna.
“The sale of Columbia Aircraft Manufacturing assets to Cessna offers the best avenue to maximize value for all of Columbia’s stakeholders and existing and future customers,” said Young. “Cessna is excited about the prospect of adding the Columbia products to its product line and will provide additional capabilities, world-class processes and financial strength to effectively serve existing Columbia customers and grow the business. Under the agreement reached with Cessna, all product warranty and service issues will continue to be honored post-acquisition and customers should expect an enhanced customer experience once the deal closes.”
Columbia is one of the largest employers in Central Oregon with approximately 440 people on the payroll. Over the past year there have been layoffs and furloughs, as cash flow issues limited production and delivery. As this issue was going to press, the fate of the remaining employees was not known.
The company manufactures a variety of low-wing all-composite aircraft, including the Columbia 350 and 400. Cessna manufactures high-wing metal aircraft.