Groen sidesteps bankruptcy with asset transfer under recapitalization

By Jennifer Chiou

New York, Dec. 14 - Groen Brothers Aviation, Inc. announced that it has transferred substantially all of its assets, including its technologies, know-how and associated patents, to subsidiary Groen Brothers Aviation Global, Inc.

At the same time, nearly all of its creditors exchanged their $186 million of GBA debt obligations for roughly 87% of the aggregate outstanding equity in GBA Global.

According to a news release, the recapitalization will result in the elimination of substantially all of GBA Inc.'s debt.

The Salt Lake City manufacturer of gyroplanes - aircraft that are part helicopter and part airplane - holds about 4% of the outstanding equity interests in GBA Global immediately following the exchange, with management holding the 9% balance.

As a result of this transaction, GBA Global becomes the operating company engaged in the exploitation of gyroplane and gyrodyne technology developed by GBA Inc., and GBA Global will do business as Groen Brothers Aviation.

GBA Global may also form additional subsidiary companies and joint venture companies, the release said. The first of those companies is a civil joint venture, which anticipates developing an aviation industrial park and aircraft manufacturing facility under an agreement with Wuhai, Inner Mongolia Autonomous Region, China, with the GBA Global JV as anchor tenant.

David Groen and Robin Wilson will continue as board members at GBA Inc., with Groen as chairman, president and chief executive officer and Wilson as executive vice-president and chief operating officer.

Background

In a 10-Q filed on May 21, 2012 with the Securities and Exchange Commission, the company stated that it was "forced to face the prospects of filing for Chapter 11 reorganization, or even Chapter 7 liquidation" because of substantial doubt about its ability to continue as a going concern.

The company at the time said its going-concern status was in jeopardy because of a lack of significant operating revenues, recurring operating losses, negative cash flows from operations, the excess of current debt over current assets, significant past due obligations and a stockholders' deficit.

The company said continuation of its operations had only been possible through the support of its major creditor, with loans that have been secured by the pledge of substantially all of the company's assets.

Despite the continued support from key creditors, the company said it has been unable to attract any equity capital since 2008.

The company reached an agreement in May with essentially all of its creditors under which it could proceed with a proposed financial restructuring without filing for bankruptcy.

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