Cessna out front to buy Columbia, officials say
Bend aviation firm first will restructure; what it all means for workers is unclear
Published: September 25. 2007 4:00AM PST
Columbia Aircraft Manufacturing Corp. in Bend filed Chapter 11 bankruptcy Monday and announced it has reached an agreement to sell to Wichita, Kan.-based Cessna Aircraft Co., the country’s largest maker of general aviation airplanes, according to officials from Columbia and Cessna.
Columbia listed approximately $60 million in unsecured debt to 1,000 to 5,000 creditors, according to its filing in U.S. Bankruptcy Court in Portland.
Chapter 11 bankruptcy frees a company from the threat of creditors’ lawsuits while the company reorganizes its finances.
“There’s really quite a surprising and long list of companies that have used the Chapter 11 format to help them restructure their business,” said Al Kennedy, Columbia’s lawyer in Portland. “They are quite often used in the context of facilitating the sale of an operating business to a purchaser.”
Monday’s filing leaves the future of one of Central Oregon’s largest employers, with 400-odd workers, in question.
Robert Stangarone, vice president of communications for Cessna, could not comment on whether Cessna would keep Columbia’s plant and employees in Bend.
He said those details are still being worked out.
He referred all other comments to a press release late Monday, which stated that Columbia’s airplanes would diversify Cessna’s product line.
Even though Cessna intends to buy Columbia, other potential Columbia buyers will have the opportunity to bid for the single-engine piston aircraft maker through an auction, Kennedy said. Cessna, however, and its $11 billion parent company, Providence, R.I.-based Textron Inc., is expected to trump the competition, he added.
“The most efficient way for Columbia to be able to facilitate that sale is through a Chapter 11 bankruptcy case,” Kennedy said. “The motion for the approval of that sale will be filed (today)” in Bankruptcy Court.
Other bidders
Other interested bidders include aviation entrepreneur Granger Whitelaw, who on Friday said his attempts to purchase the company with an investment group were rebuffed by Columbia. Whitelaw runs aerospace organization Rocket Racing League and venture consulting firm Blue Car Partners.
By the end of November or December, Kennedy said Columbia hopes to have completed a sale.
Until then, Columbia will operate as usual with its regular cash flow and a $3 million loan Kennedy expects the Bankruptcy Court will approve by Wednesday. The loan comes from Composite Technology Research Malaysia, which is backed by the Malaysian Ministry of Finance, owner of 99 percent of Columbia.
The loan is meant to help Columbia stay in business during bankruptcy reorganization.
Columbia’s reasons for filing a Chapter 11 bankruptcy are twofold, Kennedy said:
• Financial necessity. The company needs additional financing to stay in business, which it can get from what’s called a debtor-in-possession loan, or the $3 million from Composite Technology Research.
• Sale of the business. Columbia has received a letter of intent from Cessna, which means the Wichita company intends to purchase Columbia.
Cessna has not released details of its potential bid for Columbia. Kennedy said Cessna will buy Columbia through a combination of cash and an assumption of Columbia debt.
Ripple through Central Oregon
Columbia at one time last year reported more than 700 employees, according to Economic Development for Central Oregon.
However, the past year has seen one layoff and two furloughs, shrinking Columbia’s labor force to a little more than 400 — still ranking Columbia among the top 15 private employers in the region.
Lancair International Inc. CEO Joseph Bartels says that in the long run, Cessna’s investment in a Central Oregon product will be a boon to the region. Lancair is a Redmond kit-airplane manufacturer founded by Columbia’s creator, Lance Neibauer.
“In the short run, it will be a bit of an inconvenience to those who were working (at Columbia),” Bartels speculated. “But if you have a major aviation player like Cessna here, how can that be a bad thing?”
However, if Cessna builds up Columbia’s business, Bartels said Cessna could challenge existing aviation companies.
“When we were by ourselves, we could dictate what (aviation) salaries are,” he said.
“Now, we have Columbia and Epic (Aircraft of Bend) and it’s a market geared toward the employee, not the employer. If Cessna comes in, it’s going to have some impact on me — it might not be that good for me.”
Neibauer, Columbia’s founder, left the company in 2006 and has a lawsuit pending against it, alleging the company denied him severance pay. The company has not responded to the suit, citing a court gag order.
U.S. investors never warmed to Columbia, Neibauer has said, but the Malaysian government did. By 2002, the Malaysian government acquired controlling interest in his company. News that the company he started is filing for bankruptcy saddens Neibauer.
“I’ve got a lot of friends over there,” he said. “This is bad in every way I can imagine it.”
Chapter 11 bankruptcy
What is a Chapter 11 bankruptcy?
Chapter 11 filings are not uncommon in the business world, said Kennedy, who has done extensive work with Chapter 11 filings.
The deals are a common phenomenon when a company’s debts exceed its assets, Kennedy said, adding that Columbia’s assets remain to be seen.
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.
Some notable companies that have filed for Chapter 11 include Delta Air Lines, Texaco Oil, Continental Airlines, Northwest Airlines and Federated Department Stores, the parent company of Macy’s.
Anna Sowa can be reached at 383-0304 or asowa@bendbulletin.com.
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