Richard Branson’s Virgin Orbit files for Chapter 11 bankruptcy

Richard Branson’s Virgin Orbit Holdings filed for Chapter 11 bankruptcy on Tuesday after the satellite launch company failed to secure the long-term financing needed to help it recover from January’s rocket failure.

The Long Beach, California-based company filed a filing in the U.S. Bankruptcy Court for the District of Delaware seeking to sell assets after announcing layoffs of about 85 percent of its 750 employees last week.

“We believe that the Chapter 11 process represents the best path to identify and complete an efficient and maximal sale,” Virgin Orbit CEO Dan Hart said in a statement.

The company listed assets of about $243 million US and total debt of $153.5 million as of September 30 in the filing.

Virgin Orbit went public in 2021 through a blank check deal, bringing in $255 million less than expected. Spun off from Branson’s space tourism firm Virgin Galactic in 2017, Virgin Orbit launches rockets from beneath converted Boeing 747s to send satellites into orbit.

Virgin Orbit’s strategy is to launch a small rocket from a 747 during flight that will allow it to be launched quickly from anywhere.

But a shift in demand toward larger launch rockets and more expensive shared rides into space on SpaceX’s Falcon 9 rocket over the past two years has raised the competitive stakes for Virgin Orbit, analysts and industry executives say.

Virgin Orbit’s sixth mission in January with its central LauncherOne rocket, the first rocket launch from Britain, failed to reach orbit and sent a payload of US and British intelligence satellites into the ocean. The value of the company fell dramatically as a result.

The company has been scrambling for new funding after the rocket failed, halting operations and laying off almost all employees on March 15 to conserve cash.

Branson’s Virgin Group, which owns about 75 percent of the launch company, said it has invested more than $1 billion in the unit, including $60 million in secured loans since November.

Branson is no stranger to setbacks

Abu Dhabi sovereign wealth fund Mubadala is the second largest investor in Virgin Orbit with a 17.9 percent stake.

Virgin Investments, a unit of the Virgin Group, will provide $31.6 million in new money to Virgin Orbit through debt-in-ownership financing to fund operations while looking for a buyer in bankruptcy, the company said.

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Billionaire Branson made his profile in the record and music retail industries in the early 1970s, with success in the travel and telecommunications industries. But he is no stranger to high-profile business failures, including Virgin Cars, Virgin Cola and Virgin Brides.

Reuters reported last month that the Texas-based investor Matthew Brown has been in talks to invest $ 200 million in the company. The talks broke down, sources told Reuters last week.

Virgin Orbit has a market value of $65 million based on Monday’s closing price, down from more than $3 billion two years ago. Shares fell 12 percent in pre-market trading on Tuesday.

Creditors include the US military

Virgin Orbit’s bankruptcy filing shows its biggest creditor is London-based Arqit Ltd, which is owed nearly $10 million for services and as customer deposits. Arqit declined to comment when contacted by Reuters.

In 2021, Arqit Quantum and Virgin Orbit announced a deal for two satellite launches intended to provide encryption services to the Five Eyes countries of the United States, England, Canada, Australia and New Zealand.

Arqit Quantum said in December it would abandon its satellite development efforts and find a way to provide secure encryption through an unspecified “underground infrastructure.”

Virgin Orbit’s second largest creditor is the United States Space Force, which has nearly $6.8 million in deposits for future launches, according to the filing.

The US Space Force, a branch of the US military, had no immediate comment.