Richard Branson's Virgin Orbit Files for Bankruptcy

After failing to secure the funding needed for the satellite launch firm tied to British billionaire Richard Branson to remain in business, Virgin Orbit Holdings Inc. filed for bankruptcy, laying off about 85 percent of its staff and cutting down operating expenses. 

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According to the company's Chapter 11 petition filed in Delaware, the company has assets valued at $243 million and debt valued at $153.5 million.

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Despite a high-profile launch failure that occurred in January, as well as a severe collapse in the stock price of the company based in Long Beach, California, this move underscores the rapid decline the firm is experiencing. As a result of Virgin Orbit's struggle to raise capital, the company halted operations in March and laid off approximately 671 employees as a result.

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Virgin Investments Ltd, the holding company of Branson's Virgin Group, has agreed to provide an additional $31.6 million to keep the pared-back operation running while it searches for a buyer. A bankruptcy filing indicates that the 72-year-old billionaire has already pumped $70.9 million into his business since November, according to bankruptcy filings.

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Virgin Orbit's chief executive officer, Dan Hart, told a press conference on Wednesday that he's looking for a transaction to position the company and its assets for "future opportunities and missions."

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In its first year as a public company, Virgin Galactic Holdings Inc, a spaceflight company owned by Branson, has not been able to turn a profit as a part of the company's larger empire which includes Virgin Atlantic Airways Ltd. and Virgin Galactic Holdings Ltd. There was a loss of about $191.2 million for Virgin Orbit last year, the company said in a regulatory filing.

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Launch company Virgin Galactic launched as a subsidiary of Virgin Galactic in 2017 as a spin-off company. In order to achieve success, Virgin Orbit focused on launching small satellites into orbit.

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Virgin Orbit, on the other hand, uses a technique known as air launch, in which its LauncherOne rocket is deployed from underneath the wing of a modified Boeing Co. 747 plane, instead of launching rockets from the ground like some of its competitors. Virgin Galactic was the first company to develop the rocket, years before the satellite-launching business was formally formed by the company.

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After successfully launching its first mission to orbit in January 2021, Virgin Orbit was able to complete four successful flights until the end of 2022. According to the company, 33 satellites have been placed into precise orbits by the company so far.

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After the company failed in January to launch the first orbital mission out of British soil, which was slated to be the company's first orbital launch from British soil, the company decided to reassess its launch frequency for this year. The vehicle was never able to reach orbit due to a problem with a fuel filter during the flight, resulting in the loss of nine small satellites on board the vehicle.

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Cash Crunch

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The mishap contributed to the acceleration of a cash crunch that has already been underway since Virgin Orbit was taken public in December 2021 via a SPAC transaction. In a court filing, CEO Hart explained that the company received just $67.8 million as a result of that deal, a number that was significantly lower than expected. 

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Hart said that Virgin Orbit began working with Goldman Sachs & Co. as well as BofA Securities Inc. in early 2022 - a short time after it went public - to pursue a sale or to raise additional capital, once it had gone public. 

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Brian Whittman, a restructuring adviser at Alvarez & Marsal who was brought on in February, filed a court declaration in June last year on behalf of Yorkville Capital Management stating that the company sold $50 million in convertible notes to the firm. Approximately $1 million of the $4 million of convertible debt had been converted prior to the bankruptcy filing, and Yorkville provided another $1 million in convertible debt last week, according to court documents.

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It is believed that higher interest rates and changes in the capital markets were the main reasons why Virgin Orbit was unable to raise enough money, Hart said. Besides the competitive nature of the satellite launch market, he also cited the slow development of the government-sponsored satellite launch market as well as other factors, including the difficulties the company itself faced in the launch process.

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As part of Virgin Orbit's previously announced reduction in staff, the company announced Tuesday that Chief Operating Officer Tony Gingiss would be leaving the company. The company eliminated Gingiss's position as part of its workforce reduction.

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It is estimated that the company's shares fell 20% to under 16 cents a share at 9:34 a.m. in New York on Monday morning.

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Virgin Orbit Holdings Inc. v. US Bankruptcy Court, District of Delaware, 23-10405, is the case at hand.