Groen Brothers Aviation restructuring eliminates $170 million of debt

By Caroline Salls

Pittsburgh, May 2 - Groen Brothers Aviation, Inc. (GBA) has reached an agreement with its creditors for a major financial reorganization, according to a company news release.

Groen said the proposed restructuring will result in the elimination of all of its more than $170 million in current debt obligations.

In this transaction, Groen will transfer substantially all of its assets, including all of its technologies, know-how and associated patents, into a new private entity expected to be called Groen Brothers Aviation Corp. (GBAC).

Complementing this action, the creditors have agreed to exchange essentially all of their debt instruments for a majority ownership of common stock in GBAC.

New operating company

As a result of this transaction, the company said GBAC will become the operating company engaged in the exploitation of gyroplane and gyrodyne technology developed by GBA, unconstrained by the debt burden that limited GBA's ability to do so.

Groen said GBA will become a non-operating entity that will derive its revenue and value from its interest in GBAC, enabling GBA's common shareholders to retain a stake in the continued development of GBA technology.

According to an 8-K filed with the Securities and Exchange Commission, the holders of the company's secured debt obligations are expected to own about 70% of GBAC based on the accrued value of the obligations as of Dec. 31.

The other GBA debt obligation holders will own roughly 17% of GBAC, management will hold a combined 9%, and GBA will hold 4%.

In addition, GBAC is expected to form subsidiaries where GBA developed technologies will be used and significant additional funding will be raised to complete the commercialization of GBA's civil and military technologies, the 8-K said.

Future outlook

"We are very fortunate to have creditors who believe in moving GBA technology development forward, instead of requiring a liquidation of assets as has been commonly witnessed in the aviation industry over the past five years," Groen director Robin Wilson commented in the release.

"The worldwide economic contraction over the past five years has been devastating for countless companies," founder and chief executive officer David Groen said in the release. "These events caused us to lose our coveted position as lead contractor in a significant DARPA contract, which negatively impacted interest in GBA from the equity markets.

"Despite the difficult financial challenges we faced during this period, we have been fortunate to have creditors who understand and believe in the GBA vision: worldwide use of GBA's sustained autorotative flight technologies.

"The company does not have, nor has it had, the hundreds of millions of dollars that our vision requires in order to be achieved.

"Through our creditors, the GBA vision and products may now be realized, and our common shareholders will have an interest in GBAC.

"With the substantial investment that is anticipated to be applied to advanced technology development, we believe GBA could still achieve considerable asset appreciation in the future."

Groen said in the 8-K that the transaction has already been approved by the holders of a majority of its voting shares.

Based in Salt Lake City, Groen Brothers manufactures gyroplanes, or aircraft that are part helicopter and part airplane.

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