Eclipse Aviation noteholders ask court to convert case to Chapter 7 bankruptcy

By Caroline Salls

Pittsburgh, Feb. 24 - Eclipse Aviation Corp.'s informal committee of secured noteholders has asked the U.S. Bankruptcy Court for the District of Delaware to convert the company's bankruptcy case to Chapter 7, used for liquidation, according to a Tuesday court filing.

The noteholders group includes Kings Road Investments, Ltd., HBK Services LLC and Citadel Investment Group, LLC.

The committee said it is convinced that asset purchaser EclipseJet Aviation International, Inc. will not be able to secure the financing required to complete the asset sale in the near term.

"The debtors can no longer wait: they are now literally out of cash, these cases are likely administratively insolvent, and, as of Feb. 18, 2009, the debtors furloughed virtually all employees without pay," the committee said in the motion.

The committee said the cases must be converted to Chapter 7 bankruptcy in order to conserve whatever value might still remain in the company's assets.

Eclipse, an Albuquerque-based aircraft manufacturer, filed for bankruptcy on Nov. 25. Its Chapter 11 case number is 08-13031.

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