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Email from ICON:

I hope this message finds you well and that you are enjoying your A5. I am writing to you today with an important update.

We have made the decision to initiate a strategic restructuring process and have filed for Chapter 11 bankruptcy protection.

While this decision will undoubtedly raise questions, I want to assure you that our commitment to providing exceptional service and support to you remains unwavering.

The decision to file for Chapter 11 protection was not made lightly, but it has become necessary to resolve the Company’s financial challenges and position the A5 for success for years to come.

The company intends to keep its operations running as smoothly as possible throughout the restructuring process to minimize disruption. We believe this process will enable the business to address its current challenges and emerge with new ownership - stronger than ever - and continue building amazing planes with a focus on innovation, safety, and incredible flying experiences.

We value your trust in us and are grateful for your continued support. We will maintain open lines of communication and provide updates as critical developments unfold.

You can read the full announcement on our website by clicking below. Please do not hesitate to reach out to our service team if you have any questions or concerns.

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Hopefully Icon handles it as well as Vans did in Oregon. Will watch with interest

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Interesting times ahead! It seems like it is a ritual of passage for an aviation company to go through the Chapter 11 process (often more than once). More than a Chapter 11, ICON is looking for a new buyer as part of the restructuring. They have already secured debtor in possession financing from their largest shareholder, so that they can sell an "on-going entity" rather than just the assets. There are already 30 filings related to this case.



Full text from the website:

ICON Aircraft, manufacturer of the revolutionary ICON A5 amphibious sport plane, today announced that it has commenced a strategic restructuring process by filing for Chapter 11 protection. The Company further disclosed that it intends to pursue a sale of its business under Section 363 of the Bankruptcy Code, while continuing to support its customers and operations during the Chapter 11 process.

The ICON Aircraft management team remains committed to the Company’s mission of revolutionizing personal aviation and continuing to support owners and employees during this transition.

The company intends to keep operations running as smoothly as possible throughout the restructuring process to minimize disruption. In a statement, Jerry Meyer, CEO of ICON Aircraft, emphasized the company’s dedication to its stakeholders: “We plan to continue to produce and sell aircraft and provide first-rate service, training, and support to our customers. We believe this process will enable the business to address its current challenges and emerge with new ownership – stronger than ever – and continue building amazing planes with a focus on innovation, safety, and incredible flying experiences.”

Throughout the restructuring process, ICON Aircraft will maintain open lines of communication with its customers, suppliers, employees, and other stakeholders to ensure transparency and provide updates on critical developments. Meyer continued by saying, “The purpose of the Chapter 11 filing is to resolve the Company’s financial challenges and position the A5 for success for years to come. We understand that this situation creates a hardship for everyone involved. However, without taking these steps, there is not a viable path forward for the business to do what we do best – build incredible airplanes and support our aircraft owners.”

The Company expects to continue operations during the Chapter 11 process and seeks to complete an expedited sale process with Bankruptcy Court approval. ICON Aircraft has arranged for debtor in possession financing to fund post-petition operations and costs in the ordinary course. To minimize the adverse effects on its business and the value of its estate, the company has filed customary motions with the Bankruptcy Court to get court approval to sustain its operations in the ordinary course, including honoring commitments to customers and vendors and fulfilling obligations to all employees.

For more information about the Company’s Chapter 11 case, including claims information, please visit https://cases.stretto.com/iconaircraft or call the toll-free hotline at (866) 993-1870. International callers should use (949) 892-1896. Inquiries can also be sent directly to [email protected]

ICON Aircraft is represented by Sidley Austin LLP as its legal counsel, Armanino LLP as its financial advisor and SSG Capital Advisors, LLC as its restructuring investment banker.

For more information about the sale process, interested parties should contact Neil Gupta of SSG Capital Advisors at [email protected].

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Thank you Marcus. I personally am very happy to have an owner in our midst (you) that is an expert in financial matters to help us understand what all this will mean to the owners both short and long term.

Thanks again.

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Skimming through the unsecured creditor list...

There is one large creditor, East West Bank at $65 million. The next one is a disputed trade claim of $1M to what appears to be a Mexican manufacturer partner. The next 10 largest creditors tally up to just $1.27 million. Garmin is owed just $34,000, and I don't see Rotax on the list.

The full Equity holder list is also available.

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The equity holder list seems to be "Sealed". Is there another list?

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The Affidavit/Declaration in Support of First Day Motion Filed By ICON Aircraft court filing has a treasure trove of information.

DECLARATION OF THOMAS M. MCCABE IN SUPPORT OF THE DEBTORS’ CHAPTER 11 PETITIONS AND FIRST DAY PLEADINGS

The Chapter 11 Cases of ICON and its affiliate Debtors were filed with the primary goal of finding a buyer for this industry-leading, cutting edge, light-sport aircraft manufacturer that recognizes the Company’s potential and intends to continue to develop and manufacture its signature A5 aircraft and other light-sport aircraft of the future. Backed by award-winning designs, cutting edge facilities and employees, global brand recognition, and a passionate community of flight enthusiasts, the Debtors intend to seek approval of bidding procedures and a likely stalking horse bid in the coming days that ensures this goal can be accomplished. The ultimate purchaser of these assets will have the opportunity to develop the future of this groundbreaking area of aviation that safely democratizes flight for aviation enthusiasts.

The Debtors and their advisors worked across borders to stabilize the business, identify potential purchasers of these unique assets, and procure the $9 million committed debtorin-possession financing that allows the Company to be sold as a going concern in the coming months. Because of these efforts, the Company believes it has a clear path to emerge from these Chapter 11 Cases in the next three to four months with the best possible recovery for its stakeholders and the Company’s assets in the hands of a buyer who believes in the future of lightsport aircraft.

The proposed DIP financing, in addition to the relief provided by the other first day motions described herein, is critical to avoid immediate and irreparable harm and allow ICON to maintain operational continuity during the sale process. The amounts proposed to be borrowed pursuant to the superpriority senior secured (non-priming) financing allow the Company the opportunity to continue to produce and sell aircraft and provide service, training, and support to its customers throughout the process— minimizing the disruption to operations while maintaining the high standards of service and training that ICON’s loyal customers have come to expect. Meanwhile, the chapter 11 process and section 363 sale will allow the ultimate purchaser to obtain these assets free and clear and emerge with the ICON brand stronger than ever.

Background

ICON’s Corporate Structure and History

ICON Aircraft was founded in 2006 in response to the Federal Aviation Administration’s (“FAA”) establishment of the light-sport aircraft (“LSA”) category and the sport pilot license (“SPL”) class. As originally conceived, LSAs were small aircraft that were easier and cheaper to certify than traditional aircraft and that could be used for basic recreational purposes and flight training. Among other aircraft, the LSA category includes powered airplanes and gliders, powered parachutes, balloons, and airships. LSAs are less expensive, safe aircraft that can be flown with a SPL, which only takes about four weeks to complete—democratizing the aviation industry by providing an easier entry point for flying enthusiasts.

The Company’s corporate structure includes several subsidiaries, including Rycon LLC, IC Technologies Inc., and ICON Flying Club, LLC. Rycon LLC and ICON Flying Club, LLC were each created for insurance purposes, which are no longer applicable. As such, neither of these subsidiaries have ongoing operations or assets. IC Technologies Inc. is used to manage the Company’s manufacturing activities in Tijuana, Mexico, which remain ongoing. A copy of the Debtors’ corporate organizational chart is reproduced below and attached hereto as Exhibit A.

Background on Light-Sport Aircraft Space

LSAs took off in 2004, when the FAA established the LSA category of aircraft and corresponding sport pilot license class. LSA aircraft are defined by, among other things, a maximum gross takeoff weight, a maximum speed in level flight, a maximum two-seat capacity, and an unpressurized cabin.

These planes are not meant for commercial or commuter flight, but are intended rather to bring the sheer adventure of flying to the general public.

LSAs can be flown with a SPL instead of a private pilot license, allowing new pilots to obtain their SPL in as little as half the time and for half the cost in training, while permitting existing pilots to transition to recreational flying with minimal red tape or hassles. LSAs often feature intuitive technology with integrated navigation features to assist pilots in their travels. In addition, as of July 24, 2023, the FAA announced that it was considering expanding the LSA category to incorporate the development of emerging technologies, including electrically-powered rotocraft, further broadening the versatility of aircraft available.

Since the FAA’s adoption of the LSA category, countries outside the United States have quickly followed suit, with Europe, Australia, and Japan each adopting similar categories in their respective regions. With the demand for LSAs only growing, it is expected that additional countries and regions will join in the years to come.

The ICON A5

From its inception, designers and engineers at ICON worked rigorously to produce a first-of-its-kind, high performance, amphibious aircraft with simple flight characteristics for safe and easy operation. The culmination of these efforts was the first iteration of ICON’s signature aircraft—the A5—which the Company brought to market and began production on in 2016.

The A5 is an amphibious sport plane that fuses outstanding aeronautical engineering with world-class product design and unprecedented safety features. The A5 is the world’s first production aircraft that is spin-resistant, making it one of the safest small aircraft ever created. In addition, the A5 has won some of the world’s most prestigious design awards and has inspired a global following.

Among its many features, the A5 boasts foldable wings with sea wing platforms, allowing pilots to enjoy the convenience of owning a personal aircraft without the additional hassle of leasing hangar space or worrying about transportation.

In addition, the increased versatility offered by the A5’s wings means that no airport is necessary—the A5 can land and launch from grass strips, secluded beaches, or smooth runways with equal ease, making it a vehicle designed to explore and touch the world in a way few aircraft have before.

Complementing its versatility, the A5 offers a removable Garmin Aera 796 GPS or Garmin G3X touch flight display, simplifying the cockpit and making it easier for new pilots to navigate flights. These touch screen displays have customizable display modes, 3D terrain views, moving maps with sectional markings, secondary instrument clusters, and flight planning systems, all of which are designed around the user experience to turn every flight into an engaging, visceral adventure. Other innovative features include removable side windows, a low instrument panel and panoramic canopy, and customizable options, such as the ability to choose between electric green, electric blue, strata gray, or astra red for aircraft color.

The ICON A5 has historically been well received by aviation enthusiasts, with over 200 aircraft completed and sold to date. Its customer base ranges in age from 25 to 81 years old, with approximately 30% of the customers having no prior piloting experience at purchase. As part of its customer experience, ICON has historically partnered with more than 50 ICON service partners in 30 states to ensure owners have access to convenient repair and maintenance services. In addition, ICON provides owners with access to 58 authorized flight instructors, as well as 9 “land only” authorized flight instructors, each of which focus specifically on sport pilot training and are well-versed in the A5 product.

In the global market, ICON is well positioned to expand its market share and become a dominant player in the growing recreational aircraft market. With a price point that makes it accessible to a growing range of people, ICON remains a leader in the LSA industry and has built a strong global brand that connotes style, luxury, and safety in recreational aircraft.

Overview of ICON’s Assets

The Company’s assets are comprised of several state-of-the-art facilities in Tijuana, Mexico, Vacaville, California, and Tampa, Florida, along with its highly trained employees, innovative intellectual property portfolio, and several strategic partnerships in the manufacturing and maintenance sectors.

Facilities

The Company has three facilities strategically located throughout North America in Vacaville, California (the “Vacaville Facility”), Tijuana, Mexico (the “Production Facility”), and Tampa, Florida (the “Sales and Service Center”).

The Vacaville Facility operates as the Company’s headquarters and aircraft completion center, with over 140,000 square feet (70,000 square feet of which is currently subleased).

The Vacaville Facility is utilized primarily for “aircraft completion,” which includes installing the parachute and rocket motor, attaching wings, completing quality assurance inspection, completing test flights, completing the Certificate of Airworthiness, and delivery to the customer.

The Company primarily manufactures the A5 in its state-of-the-art, 300,000 square foot Production Facility, after which the A5 components are shipped to the Company’s Vacaville, Facility for completion. The Company’s production process includes eight station final assembly lines supporting fifty-eight operations and an eight station sub-assembly line supporting one hundred twenty-eight operations.

The Company plans to sublease 80,000 square feet of the Production Facility and to use an additional 30,000 square feet for contractor manufacturing purposes, whereby ICON makes carbon fiber products for other companies.

Finally, the Company operates a Sales and Service Center in Tampa, Florida, where it has 682 square feet of office space available to assist customers in regional sales and servicing support.

Employees

As of the Petition Date, the Company directly and indirectly employs a U.S.-based workforce of approximately fifty-five (55) individuals, of which forty (40) are full-time, salaried employees and fifteen (15) of which are hourly employees. Substantially all of the workforce is located in Vacaville, California.

In addition to its employees, the Company has historically relied on a number of specialized individuals on a temporary or project basis. As of the Petition Date, the Debtors retain approximately seventeen (17) independent contractors to provide services as needed. None of the employees or independent contractors are represented by a union or employed pursuant to a collective bargaining agreement.

Strategic Partnerships

The Company is party to a Manufacturing Services Agreement (the “Services Agreement”) with Co-Production International, Inc. (“CPI”), under which CPI provides manufacturing employees and facilities services at the Production Center. The Services Agreement allows the Company to utilize the local workforce in Tijuana, Mexico through CPI and passes along certain costs of employment and facility maintenance to CPI.

In addition, the Company is party to certain key manufacturing partnerships, whereby ICON makes carbon fiber products for other companies, supplementing its revenue and providing additional areas for growth outside of its A5 offering. Finally, the Company has certain strategic partnerships with service and maintenance facilities, flight instructors, and software services, which allows ICON to offer a wide range of customer-service focused support to the owners of the A5.

Technology and Intellectual Property

The innovative A5 was designed by the Company in-house, meaning that the Company holds thirteen critical U.S. patents and forty U.S. and foreign patent applications related to the product. The Company additionally continues to improve the A5, with current projects focused on the development of semi-autonomous piloting software for the A5 and the redesign of the glass cockpit to improve the customer experience and add even greater visibility.

Prepetition Capital Structure

Funded Debt

The Debtors have significant prepetition unsecured funded debt obligations, consisting of approximately $105,400,000 in convertible note obligations and approximately $65,000,000 in other unsecured note obligations. A summary chart of the Debtors’ prepetition capital structure is set forth below:

As of the Petition Date, the aggregate principal amount outstanding under all of the Debtors’ prepetition unsecured funded debt obligations totaled approximately $170,400,000. The Debtors have no prepetition secured debt obligations.

Trade and Related Debt

In addition to its funded debt, the Debtors have trade and other unsecured debt. As of the Petition Date, the Debtors estimate that they owe approximately $3.3 million on account of unpaid invoices owed to vendors or suppliers or other general unsecured debt.

Equity

ICON’s equity is privately held, with ICON Aircraft, Inc. authorized to issue up to 322 million shares of preferred stock and 488 million shares of common stock. As of January 26, 2024, ICON had nine series of preferred stock issued and outstanding, constituting approximately 176.9 million of outstanding preferred equity shares. ICON estimates that only approximately 11.3 million shares of common stock are outstanding.

Key Events Leading to Chapter 11 Filing

The development of LSA vehicles is a capital intensive, time-consuming process. Historically, the Company has been plagued by a number of issues, relating to manufacturing delay and supply chain disruptions. Although the Company has learned from these growing pains and taken steps to alleviate or mitigate the issues, these issues required the Company to borrow additional capital, leading to its unsustainable capital structure and culminating in its current liquidity crisis. Stated simply, the revenue produced cannot support the Company’s significant levels of funded unsecured debt. As set forth in more detail below, ICON’s declining liquidity, along with a failed out-of-court merger process, required it to engage advisors to explore strategic alternatives, ultimately choosing to file these Chapter 11 Cases and initiate the section 363 sale process. The Debtors intend, through these Chapter 11 Cases, to engage in an expeditious marketing and sale process for their assets, all in an effort to maximize the value of their assets and operations for the benefit of their stakeholders.

ICON’s Declining Liquidity
Manufacturing and Supply Chain Issues

Despite its status as a first mover in the amphibious LSA market, the Company has faced manufacturing and supply chain challenges since it began constructing the A5. Specifically, internal tooling bottlenecks prevented the Company from producing the eight to ten aircraft per month that it needed to reach a breakeven EBITDA level. In addition, delays in receiving type certification in the primary category for the A5 from the FAA, and transitory supply chain disruptions driven by the COVID-19 pandemic contributed to the growing cash crunch.

An additional challenge facing the Company was that, prior to late 2023, flight certification of the A5 outside of the United States had not been obtained. Although certification has since been received, the restrictions severely limited ICON’s ability to market the A5 in other markets like Europe and China, where untapped markets could have yielded significant sales that would have allowed the Company to avoid the need for these Chapter 11 Cases.

Shareholder and Management Disputes

Compounding the liquidity crisis, the Company was forced to defend two costly lawsuits filed by certain shareholders, directors, and former officers of the Company. On June 4, 2021, certain shareholders, directors, and former officers of the Company filed a lawsuit in Delaware Chancery Court against certain other shareholders, directors, and the president of the Company, asserting direct and derivative claims regarding breach of fiduciary duties, unjust enrichment, fraudulent inducement, misappropriation of technology, and self-dealings (the “Derivative Complaint”). The Company was named as a nominal defendant solely in connection with the derivative claims.

The Derivative Complaint was subsequently amended to, among other things, remove certain direct claims and add allegations regarding purported transfers of the Company’s technology to China, the termination of the former Chief Executive Officer of the Company, a special committee of the Company that was formed in 2021, a financing transaction with East West Bank, and the appointment and resignations of various directors. The Chancery Court denied the defendants’ and the Company’s Motions to Dismiss in January 2023, and discovery has now commenced in the case. In addition, the Company is also a defendant in a wrongful termination and retaliation case filed by its former chief executive officer in state court in California (the “State Court Suit”).

CFIUS Investigation

Pudong Science and Technology Investment (Cayman ) Co., Ltd. (“PDSTI”) is one of the Company’s major shareholders, holding approximately fifty percent (50%) of the Company’s outstanding preferred shares through one or more of its affiliate companies. In August 2021, the Committee on Foreign Investment in the United States (“CFIUS”) initiated a review of PDSTI’s investment in the Company. Although CFIUS eventually cleared PDSTI’s investment without the need for mitigation in February 2022, the investigation consumed significant portions of the Company’s already limited resources, including management’s time as well as professional expenses. In part due to the timing of the CFIUS investigation, which compounded the professional fee burn caused by the Derivative Complaint and State Court Suit, the Company was forced to enter into a cost-cutting mode, which left it unable to fully implement its financing and business plan or to otherwise avoid the its dire situation.

Initial Strategic Transactions Process

In response to its increasingly dire cash situation, the Board began looking at strategic processes that could assist in right-sizing the balance sheet and raising additional capital. In November 2021, ICON’s Board of Directors (the “Board”) was presented with a strategic business plan designed to make the Company EBITDA positive, and the Board approved such plan, which included, among other things, the engagement of Stifel Miller Buckfire. Unfortunately, the engagement with Stifel Miller Buckfire did not result in any financing or strategic transactions.

In June of 2023, the Board then engaged SSG Capital Advisors, LLC (“SSG”) to assist in fundraising activities. In January 2024, the Company received a letter of interest from a strategic aircraft manufacturer that proposed a merger of the two companies (“Merger LOI”). SSG presented the Board with a summary of the fundraising process and detailed explanation of the Merger LOI.

Appointment of Special Committee

In January 2024, the Board formed a special committee (the “Special Committee”) consisting solely of one independent director, Thomas G. FitzGerald. The Special Committee is authorized by the Board to evaluate, negotiate, deem advisable, approve, execute, consummate and implement, or reject, strategic options with respect to the Company and its subsidiaries to the maximum extent permitted by the Company’s charter, bylaws, stockholders agreement and the other organizational documents. Specifically, the Special Committee was authorized to evaluate and move forward with a sale, financing, intellectual property licensing, business combination with a special purpose acquisition company, restructuring, reorganization, recapitalization, bankruptcy, insolvency or other transaction deemed necessary or desirable by the Special Committee; provided that the decision to file for bankruptcy continues to require approval by the full Board.

The Special Committee evaluated and negotiated the transaction contemplated by the Merger LOI. Unfortunately, the proposed merger was unable to be completed primarily due to the lack of support from the Company’s stakeholders and, in part, due to the strategic counterparty’s decision not to proceed beyond preliminary due diligence. Following the determination that the Merger LOI was not feasible, the Special Committee began to explore additional strategic alternatives—including an array of restructuring options and other potentially value maximizing transactions—as the Company’s cash position became critically low. After evaluating all strategic options and (after no other strategic option materialized), the Special Committee ultimately approved the facility with the Proposed DIP Lender and recommended a chapter 11 filing to the ICON Board.

Marketing and Sale Process

At the direction of the Board, SSG began its marketing and sale process on September 11, 2023. The buyer universe included strategic investors such as aircraft manufacturers (including LSA manufacturers and electric vertical take off and landing (“eVTOL”) vehicle manufacturers), airlines, aircraft solutions and services providers, power sport manufacturers and auto manufacturers. SSG also approached parties for potential financing opportunities, including private equity, growth equity, venture capital firms and family offices that either invest in or have identified an interest in investing in aerospace and defense, general manufacturing and aircraft manufacturing, including companies of all categories (e.g., business jets, small jets, twins and turbo props, light single engines, LSA and eVTOL), or invest in special situation type transactions.

SSG directly contacted 468 investors in total, and twenty parties ultimately executed a confidentiality agreement (“CA”). The Confidential Information Memorandum prepared by the Company and SSG along with data room access were provided to parties that executed the CA. In an effort to the supplement the marketing process, SSG also posted the opportunity on a no-names basis to several global deal platforms. SSG also conducted outreaches to various Asian and Middle Eastern investment funds, venture lenders and high-net worth individuals.

While the marketing process was robust and generated interest from both strategic and financial buyers, no party was willing to move forward with a sale outside of the protections offered by chapter 11 of the Bankruptcy Code.

Board Considers Strategic Alternatives and Hires Advisors

Following the failure of the Merger LOI, the Board was forced to start considering other strategic alternatives. In connections with those considerations, the Board engaged Sidley Austin LLP (“Sidley”) as Company counsel on or around February 2024, Armanino, as financial advisor, on or around late March 2024.

Ultimately, the ever-decreasing liquidity forced the Company’s hands, necessitating the Company’s pivot to chapter 11 preparation in the last week of March. The decision to file for chapter 11 protection was made after significant discussion at the management Board, and Special Committee levels, with the majority of the Board determining that chapter 11 provided the most viable course of action to create an opportunity to sell the Company to a party that would be interested in operating it as a going concern and to ensure a maximum return for ICON stakeholders.

DIP Negotiations

Following the pivot to chapter 11 preparation, SSG reached out to a wide variety of potential alternative lenders, including third-party financial institutions experienced in distressed lending and financings as well as existing unsecured lenders and shareholders. It is my understanding that the current unsecured lenders and shareholders were unwilling to offer financing due to the size of the facility requirement. Additionally, I am informed that third-party prospective lenders were only willing to size the Debtors’ facility based off a conservative loan-to-value ratio of the liquidation value of the assets. However, the specialty nature of the Debtors’ assets made it difficult for any third-party to assign a value sufficient to fulfill the financing need.

As a result, the only debtor-in-possession financing offer received by the Debtors came from Feiren International Co., Ltd. (the “Proposed DIP Lender”). PDSTI, who holds approximately 50% of the of the Company’s outstanding preferred shares through one or more of its affiliate companies and approximately $93,000,000 of the convertible unsecured notes—holds an indirect minority equity interest in the Proposed DIP Lender. The Proposed DIP Lender is also the licensee of the Intellectual Property License Agreement with ICON Aircraft, Inc., dated July 29, 2021. In addition, a PDSTI affiliate is party to an arrangement with the proposed DIP Lender’s ultimate parent, Shanghai Feiren Technology Co. Ltd. (“Feiren Shanghai”), pursuant to which the PDSTI affiliate agreed to manage all assets, business, and daily operations of Feiren Shanghai. All rights and obligations under the arrangement were then assigned to a different PDSTI affiliate. Notably, it is my understanding that the Proposed DIP Lender is the only party to have offered financing in these Chapter 11 Cases.

Chapter 11 Filing and Next Steps

On April 2, 2024, the Board authorized the Debtors to each commence voluntary proceedings under chapter 11 of the Bankruptcy Code. ICON intends to maximize the value of its assets for stakeholders in this case by expeditiously selling its assets, including its intellectual property portfolio, to the highest and best bidder(s) in a public auction.

ICON has determined that an expeditious sale process and resolution of these Chapter 11 Cases is necessary to preserve its limited liquidity and ensure the greatest possible recovery for its stakeholders. In addition, ICON believes that the relief requested in the various First Day Motions is required to avoid immediate and irreparable harm and appropriately balances the need for the Company to swiftly proceed towards an orderly liquidation with the due process and notice required under the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

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Relevant First Day Motions from the above filing

Customer Programs Motion

Pursuant to the Debtors’ Motion for Entry of Interim and Final Orders Authorizing the Debtors to (I) Maintain and Administer Their Existing Customer Programs and Honor Certain Prepetition Obligations Related Thereto, and (II) Granting Related Relief (the “Customer Programs Motion”), the Debtors seek entry of an interim order and a final order: (a) authorizing, but not directing, the Debtors to maintain and administer their prepetition Customer Programs (as defined below) in the ordinary course of business and consistent with past practice and honor their obligations related thereto, whether arising before or after the Petition Date, as necessary and appropriate in the Debtors’ business judgment; and (b) granting related relief.

The Debtors provide certain warranties and other accommodations to customers to develop and maintain positive customer relationships (collectively, the “Customer Programs”). The Debtors’ Customer Programs include a deposit program, a voucher program for training and maintenance, and a warranty program. The Customer Programs promote and maintain customer satisfaction, which, in turn, increases the Debtors’ goodwill and the value of their brand.

In the ordinary course of business, the Debtors collect customer deposits and predelivery payments (the “Customer Deposits”) in connection with the sale of aircraft. Generally, pursuant to the applicable deposit agreements (the “Deposit Agreements”), the Customer Deposits are applied toward the final purchase price of the aircraft upon the closing of a sale. However, in some circumstances, certain Customer Deposits may be refundable. As of the Petition Date, the Debtors books and records reflect approximately $1.7 million in Customer Deposits, including approximately 430 Customer Deposits totaling $1.1 million that may be refundable (the “Potentially Refundable Deposits”). To maintain customer goodwill and avoid disruption to the Debtors’ business operations, the Debtors respectfully submit that authorizing, but not directing, the Debtors to comply with Customer Deposit refund obligations is necessary to avoid immediate and irreparable harm.

Moreover, a large portion of the Potentially Refundable Deposits are over five (5) years old. In the ordinary course of business, the Debtors conducted a noticing program (the “Noticing Program”) to contact customers holding a Potentially Refundable Deposit and offer such customers an opportunity to either (a) cancel their purchase and obtain a refund or (b) move forward with a purchase of an aircraft. The Debtors currently hold the Potentially Refundable Deposits in segregated accounts. Out of an abundance of caution, the Debtors request that the Court authorize, but not direct, the Debtors to provide further notice to holders of Potentially Refundable Deposits that, unless the customer responds within twenty-one (21) days of such notice, the Debtors may terminate the applicable Deposit Agreement in their sole discretion. Such notice will be provided, pursuant to the Deposit Agreements, via email or pre-paid overnight delivery. The Debtors also respectfully request that the Court authorize, but not direct, the Debtors to continue the Noticing Program in the ordinary course of business.

With the purchase of every aircraft, the Debtors include one transition training voucher (each, a “Voucher” and collectively, the “Voucher Program”), which entitles the recipient, subject to certain limitations and requirements, to up to 20 total (ground + flight) instructor hours or $3,300.00 in billable instructor fees, whichever comes first. A Voucher has no cash value and is not redeemable for cash or gift cards, nor is it valid toward any other service or purchase. The Voucher expires six (6) months after the closing of an aircraft sale. Typically, no cash outlays are required in connection with the Voucher Program, but the Debtors are sometimes required to pay for third party flight instructors or other expenses associated with the training and maintenance. The Debtors’ inability to honor the obligations incurred pursuant to the Voucher Programs may have a negative effect on the confidence in the Debtors’ business and the Debtors’ ability to fulfill obligations to customers. The Debtors believe the cost of honoring the obligations relating to the Voucher Program is more than offset by the reciprocal benefit the Debtors receive. Accordingly, the Debtors request the authority to continue to honor the Voucher Program. The Debtors believe that approximately $60,000 is currently outstanding as of the Petition Date.

Substantially all of the Debtors’ Icon A5 aircraft are covered by a limited warranty (the “Warranty”), which covers, subject to its limitations, exclusions and conditions, the aircraft for one year and certain components for periods ranging from one (1) to ten (10) years, depending on the component. The Warranty ensures that the Debtors’ products perform in accordance with the Debtors’ specifications. In the event of any failure of an aircraft or component covered by the Warranty, the Debtors must repair or replace the aircraft or the component.

In connection with the initial Warranty included with product sales, the Debtors record a warranty accrual (the “Warranty Accrual”), which reflects estimated material, labor, and other costs related to potential or actual Warranty claims for which they expect to incur an obligation. Claims against the Warranty Accrual have not previously resulted in cash being remitted to a customer. Instead, if a claim requires a replacement part, there is a reduction to the Warranty Accrual with a commensurate reduction to inventory when a replacement unit is delivered to a customer, and if a claim requires repair, the engineer’s time is relieved against the Warranty Accrual with no income statement or cash flow impact. At any point in time, the Debtors’ Warranty Accrual is approximately $450,000. The Debtors base their estimates of anticipated rates of Warranty claims and the costs associated therewith primarily on historical information and future forecasts. The Debtors periodically assesses the adequacy of the Warranty Accrual and adjusts the amount as necessary. If the historical data used to calculate the adequacy of the Warranty Accrual is not indicative of future requirements, additional or reduced Warranty Accrual may be required. I believe that the Debtors’ ability to honor the Warranty is necessary to maintain their reputation for reliability and strong customer relationships.

I believe that maintaining customers’ goodwill is critical to the Debtors’ ongoing operations during their wind-down and sale process and the preservation and maximization of stakeholder value. Accordingly, I believe that the Customer Programs Motion should be granted.

This motion was granted by the judge with some limitations.

The Debtors are authorized to continue to administer the Customer Programs in effect and honor any prepetition obligations related to the Customer Programs as described in the Motion, in each case, in the ordinary course of business.

The Debtors shall not satisfy any amounts that come due in connection with prepetition Customer Program obligations in excess of the following amounts without further order from this Court: $350,000 with respect to refund obligations and $65,000 with respect to the Vouchers.

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Here is a ChatGPT summary of the events leading up to ICON Aircraft's Chapter 11 filing, and the underlying causes.

1. **Manufacturing and Supply Chain Challenges**: ICON faced significant issues in manufacturing and supply chain management, specifically internal tooling bottlenecks that prevented the Company from producing the eight to ten aircraft per month that it needed to reach a breakeven EBITDA level. These problems were exacerbated by the COVID-19 pandemic, which further strained its operations and cash flow.

2. **Financial Struggles**: The company's revenue was insufficient to support its high levels of unsecured debt, totaling approximately $170.4 million. This unsustainable capital structure, combined with a liquidity crisis, made it difficult for ICON to continue its operations without restructuring its debts.

3. **Market Expansion and Certification Issues**: ICON struggled to obtain flight certification for the A5 outside the United States until late 2023, limiting its market expansion into Europe and China—regions with potentially significant sales opportunities.

4. **Legal and Management Disputes**: The company was embroiled in costly lawsuits, including a derivative complaint involving allegations of breach of fiduciary duties and a wrongful termination case. These legal battles drained ICON's resources and further strained its financial position.

5. **Regulatory Investigation**: A review by the Committee on Foreign Investment in the United States (CFIUS) into one of ICON's major shareholders consumed considerable resources and time, adding to the company's financial and operational challenges.

6. **Failed Merger and Strategic Alternatives**: Attempts to find strategic solutions, including a proposed merger and engaging with financial advisors to explore restructuring options, did not materialize into viable outcomes. This left ICON with dwindling cash reserves and no other strategic options but to consider bankruptcy.

7. **Chapter 11 Decision**: Facing critical low cash positions and after evaluating all possible strategic options, the company's Special Committee recommended filing for Chapter 11 bankruptcy as a means to restructure the company financially and operationally. This decision was aimed at ensuring ICON could continue its operations and sell its assets in a manner that maximized value for stakeholders.

In summary, ICON Aircraft's Chapter 11 filing was the culmination of manufacturing and supply chain disruptions, financial difficulties, certification delays, legal disputes, and failed attempts at strategic restructuring, all of which significantly impacted its liquidity and operational viability.

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The equity holder list seems to be "Sealed". Is there another list?

Page 21 of this filing has the full list. https://cases.stretto.com/public/x32...0000000020.pdf

I imported them into Excel and summarized the top holders.

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@Marcus Look for "Kodiak Research Ltd." out of Nassau Bahamas for anything Rotax related. That is the distributor for Rotax.

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@Marcus Look for "Kodiak Research Ltd." for anything Rotax related. That is the distributor for Rotax.

Kodiak is owed $115,260. Interestingly they are in Nassau, Bahamas.

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Yeah that's were they are based it basically a shell corp. there is a training facility and test cell at the nassau airport but its very small and only a few work there. I took my Advanced Diagnostics Training course there but the tech rep instructor flew in to offer it. Its the distributor for the USA and South America. So anyway that's what they owe for Rotax engines and parts.

There is a separate distributor out of Canada called Rotech Motor Ltd. They do the accident investigations in the USA with the NTSB.

Here is the distributor network for all of Rotax.

https://www.flyrotax.com/p/about-rotax/distributors

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The Customer Program Motion Order is now effective with the following limitations:

The Debtors shall not satisfy any amounts that come due in connection with pre- petition Customer Program obligations in excess of the following amounts without further order from this Court: $350,000 with respect to refund obligations, $65,000 with respect to the Vouchers, and $50,000 with respect to Warranties.

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The debtor-in-possession financing has been approved by the court in an interim order. As part of the filing they included a budget for the next few weeks.

(I) authorizing the Debtors to obtain postpetition financing pursuant to a superpriority, senior secured, debtor-in-possession multiple draw term loan facility in an aggregate principal amount of up to $9 million;




Need for DIP Facility. The Debtors have a critical need to obtain credit pursuant to the DIP Facility to, among other things, make payroll, satisfy other working capital and operational needs, and fund these Chapter 11 Cases, in each such case in accordance with the terms of this Interim Order and the Approved Budget. The Debtors’ access to sufficient working capital and liquidity, including through access to the DIP Facility, is necessary to preserve and maintain the value of the Debtors’ estates, to run a value-maximizing sale process for the Debtors’ assets to the benefit of creditors, and to avoid immediate and irreparable harm to the Debtors, their estates, and their creditors. Entry into this Interim Order is in the best interests of the Debtors, their creditors, and their estates, and good cause exists for granting the relief requested in the Motion as set forth herein.


Use of Proceeds of DIP Facility. The Debtors have prepared and delivered to the DIP Lender an initial budget (the “Initial DIP Budget”), a copy of which is attached hereto as Exhibit 2. The Initial DIP Budget reflects the Debtors’ anticipated cash receipts and disbursements for the 13-week period following the Petition Date (the Initial DIP Budget and each subsequent budget approved by the DIP Agent, in its reasonable discretion and in accordance with the DIP Credit Agreement, shall constitute, without duplication, an “Approved Budget”). The proceeds from the DIP Facility shall be used in accordance with the Approved Budget and consistent with the terms and conditions of the DIP Credit Agreement, including that they may be used to pay vendors or suppliers on payment-in-advance or cash-on-delivery terms for any product, service, or material needed to operate the business in the ordinary course, as is and has in the past been required from time to time in the ordinary course of business; provided that such payment is in compliance with the Approved Budget and does not conflict with the terms of the DIP Credit Agreement.

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If anyone wishes to listen to the court proceeding itself, you can do so by downloading (to desktop) the following PDF document, open it with Adobe, and click on the paperclip button on the right (sometimes left) side of the window. There is an MP3 of the court proceeding.

Direct link to PDF:
https://cases.stretto.com/public/x32...0000000032.pdf

Link to Full Docket - the PDF is item #45
https://cases.stretto.com/iconaircraft/court-docket

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Am I reading this correctly, there is only one aircraft sale/delivery in the next 13 weeks? Are they temporarily shutting-down the assembly shop?

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That’s actually one better than the rumor mill was saying. They haven’t performed a production test flight since mid January according to Flight Aware last week.

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That's a bummer. I was hoping the new certification would mean 2017-18 production rates.

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That will never come back, not only is airplane design proven not capable of that production rate for any reasonable length of time there isn't a market that size. We were working 12-16 hour shifts in 17-18 trying to meet 10/month rate, I think the best we actually completed was 6/month although the Mexico plant was able to build 10 carbon airframes per month but with 24-7 operations in 3 shifts with 300+ workers. The aircraft is incredibly labor intensive to build (you can read a little about that in the legal doc above about the tooling). Now that they have completely alienated the supply base with the Chapter 11, credit and acceptable terms will be hard to come by and suppliers all know the actual market and production rates so they won't extend much if any. Sadly is a niche market. Cirrus only clears ~360 per year of SR-22's, that's the best selling GA aircraft for the last 20 years.

This situation is completely different than Vans. There is a market that is completely known and is huge by any General Aviation numbers. Vans just had a confluence of quality issues that came in a Tsunami all at once (or in very short order) along with not pricing their price their parts correctly leading to a cash crunch. Vendors will support Vans as its a great company, known product, good people, they just came on hard times.

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I don't have twitter, but someone should tweet Elon Musk and ask him to save ICON.

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Great analysis and I’ll just have to patiently wait and see. I hope they move through quickly and emerge stronger.

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Does anybody know what is going on at Progressive Aerodyne SeaRey? I heard they ceased operation, but can find nothing on news on it

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The company went into financial difficulties and ceased operations. Apparently there is something in the works that is being kept secret right now. They have a user site Searey.us. Lots of information there.

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That is so strange Avweb, Aviation Week, EAA, or AOPA haven’t said boo. Seems it would fit storyline of aviation companies working through issues.

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It’s probably all my fault. I bought a Searey, one year later they close up. Just bought the Icon in October, and here we go again.

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Ha! You may be in company. Met a guy with Piaggio who wants an ICON too. He said, “What’s another airplane from a company in CH11.”

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How long has SeaRey ceased ops?

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Not that long. Maybe 8 months. Started slowing down. Reports from people placing parts orders, and not receivIng them. While others were able to get some items. There are others that are manufacturing certain parts for the Searey. There is lots of support for the product. I’m speaking about the experimental version though. Not sure about the LSA version. I actually stopped paying attention once I got the Icon.

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Thanks! That more info than I have been able to find online. It’s like a news blackout. :/