TECT Aerospace Group

THE DEBTORS MANUFACTURE AIRCRAFT PARTS

The Debtors in this Bankruptcy Case are:

• TECT Aerospace Group Holdings, Inc.
• TECT Aerospace Kansas Holdings, LLC
• TECT Aerospace Holdings, LLC
• TECT Aerospace Wellington Inc.
• TECT Aerospace, LLC
• TECT Hypervelocity, Inc.
• Sun Country Holdings, LLC

These Debtors manufacture aircraft parts and were hit by two unanticipated and revenue-decimating events in a short time period. First, in 2019, the Debtors were substantially impacted by the slowdown and then halt of manufacturing the 737 MAX aircraft following two tragic plane crashes. Then, the COVID-19 pandemic substantially slowed air travel in 2020, which also impacted new aircraft orders. Prior to these two events, the Debtors were ramping up production, so they had taken on debt that they became unable to service.

DEBTORS ARE CARRYING A SIGNIFICANT DEBT LOAD

Before filing for bankruptcy, the Debtors reported having significant debt, including:

• $41.9 million in secured debt owed to Boeing
• $1.25 million in debt secured by specific equipment
• $19.7 million in unsecured debt owed to affiliates of the Debtors
• $35 million in general unsecured debt, including $17 million in unsecured loans from Boeing

In addition to this significant debt, the Debtors entered into an agreement with Boeing for additional financing to get the Debtors through and out of the bankruptcy. This type of debt is known as debtor-in-possession financing, or DIP financing. Boeing has agreed to extend an additional $60.2 million to the Debtors in DIP financing. This massive new loan will be entitled to repayment prior to unsecured debt because of protections given to DIP lenders by the Bankruptcy Code.

TECT AEROSPACE IS UP FOR SALE

Given the extreme amount of secured and DIP debt that these Debtors are carrying, unsecured creditors will have an uphill climb to see repayment in this case. Recently, the Debtors filed applications to employ an investment banker and a Chief Restructuring Officer, or CRO, to lead a sale process for the Debtors’ assets.

The good news about the Debtors’ sale is that they are intending and planning to sell their business as a going concern. This means that the Debtors will continue operating through the bankruptcy and plan to sell to a buyer who will continue operating the Debtors’ business after bankruptcy.

For unsecured creditors, this is good news for two reasons. First, the Debtors’ continued operations means that certain key creditors can push for repayment of their claims as a “critical vendor” in the bankruptcy case. Second, unsecured creditors may be able to enter into a continuing business relationship with the Debtors after they are sold to new operators, which could be a valuable ongoing income stream for suppliers.