Northstar Aerospace U.S. subsidiaries file bankruptcy to complete sale

By Caroline Salls

Pittsburgh, June 14 - Northstar Aerospace, Inc. U.S. subsidiaries Northstar Aerospace (USA) Inc., Northstar Aerospace (Chicago) Inc., Derlan USA Inc. and D-Velco Manufacturing of Arizona, Inc. filed Chapter 11 petitions Thursday in the U.S. Bankruptcy Court for the District of Delaware to complete a going-concern sale of their business, according to a news release.

In addition, the company said it, Northstar Aerospace (Canada) Inc. and some of its Canadian subsidiaries are applying for an initial order from the Ontario Superior Court of Justice (Commercial Division) under the Companies' Creditors Arrangement Act.

Northstar said it will request CCAA protection for an initial period of 30 days, expiring on July 14. While under CCAA and Chapter 11 protection, creditors and others are stayed from pursuing any claims or enforcing any rights against the filing entities.

Stalking horse bid

The company said it entered into an asset purchase agreement with Wynnchurch Capital, Ltd. affiliates Heligear Acquisition Co. and Heligear Canada Acquisition Corp. under which substantially all of the assets of Northstar will be sold for $70 million, together with the assumption of liabilities.

The stalking horse bid will be subject to a competitive bidding process. The deadline for competing bids is expected to be July 14.

If no superior bids are received, the company said there would be insufficient proceeds to repay its secured creditors and no proceeds to pay unsecured creditors or shareholders.

The company said its board of directors elected to resign their positions concurrently with the CCAA filing. Northstar is seeking the appointment of FTI Consulting Canada, Inc. as chief restructuring officer and is proposing that Ernst & Young Inc. be appointed as monitor in the CCAA proceeding.

DIP financing

Northstar said its existing secured lenders agreed to provide up to $22 million in debtor-in-possession financing during the CCAA and Chapter 11 proceedings. Northstar also obtained additional DIP financing of up to $7 million from Boeing Capital Loan Corp.

Fifth Third Bank is the administrative agent on the $22 million senior DIP loan.

The DIP facilities will mature on the earliest of the sale closing date, 21 days after the bankruptcy filing if a final order is not entered and acceleration of the loans.

Interest on the senior and junior loans will be Base rate plus 475 basis points.

The company is seeking interim access to $3.2 million of the senior loan and $6.2 million of the junior loan.

Debt information

According to court documents, Northstar has $0 to $50,000 in assets and $50 million to $100 million of debt.

The company's largest unsecured creditors include the Pension Benefit Guaranty Corp. of Washington, D.C., and Supplemental Employee Retirement Pension Plan (U.S.) of Toronto, both with pension liability claims in undetermined amounts, as well as The Boeing Co., with a customer agreement claim of more than $1 million.

Bayard, PA represents the company.

Northstar is a Chicago-based maker of flight-critical gears and transmissions. Its Chapter 11 case number is 12-11817.

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