The fund pressed for bankruptcy after Franzen’s Virgin Orbit launch failure

WASHINGTON, April 4 (Reuters) – Virgin Orbit Holdings ( VORB.O ), founded by billionaire Richard Branson, has filed for Chapter 11 bankruptcy as the satellite launch business struggles to secure long-term financing following a failed launch in January.

The filing came two years after Virgin Orbit first went public at a valuation of about $3 billion. But the crash in January forced the company to scramble for fresh funding and halt operations.

“We believe the Chapter 11 process represents the best path to identify and finalize an efficient and value-maximizing sale,” Virgin Orbit Chief Executive Dan Hart said in a statement.

The company, spun off from space tourism giant Virgin Galactic in 2017, sends satellites into orbit using rockets launched from modified Boeing ( BA.N ) 747 aircraft.

The Long Beach, California-based company filed to sell its assets in a Delaware court days after announcing layoffs of about 85% of its 750 employees.

Virgin Orbit listed assets of about $243 million and total debt of $153.5 million as of Sept. 30. The company went public in a blank-check merger in December 2021, raising $255 million less than expected.

The company was valued at $65 million at the close of trading on Monday. On Tuesday, its shares fell 24% to trade at just 15 cents each.

The company’s sixth mission in January using its core LauncherOne rocket, the first rocket launched from Britain, failed to reach orbit, plunging commercial and defense-related research satellites into the ocean.

An accident involving England’s Cornwall Spaceport forced the company to halt operations and put all of its employees on bail in March.

Business model Virgin Orbit is set up to launch small rockets and provide short-notice launches from anywhere, including for tactical military purposes, to address a need highlighted by the conflict in Ukraine.

But over the past two years, demand for larger launch vehicles and more cost-effective shared payload space launches on SpaceX’s Falcon 9 rocket have raised the competitive stakes.

Venture capital investments in space startups are set to decline 50% year-on-year to $21.9 billion in 2022 as capital spending rises alongside global interest rate hikes.

“The volatile capital markets and high interest rate environment made it difficult to obtain new capital,” Hart said in a court filing. He said the company was “experiencing heavy pricing pressure from well-capitalized competitors in the commercial publishing market.”

With two vertical-launch space stations due to debut next year, Britain is determined to be a major provider of commercial small satellite launches, the UK Space Agency said.

The two satellite makers that lost high-tech payloads in the failed January launch, Britain’s Space Forge and Poland’s SatRev, which owns 4% of Virgin Orbit, said they had backup plans for replacement launches if needed.

Virgin Group Finance

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

Abu Dhabi’s sovereign wealth fund Mubadala is the second largest investor with a 17.9% stake.

Virgin Investments, a unit of Virgin Group, will pay $31.6 million for Virgin Orbit while it looks for a buyer, the companies said.

Despite the success of his travel and telecommunications businesses, Branson was associated with several high-profile business failures during his career in the 1970s.

Reuters reported last month that Texas-based Matthew Brown was in talks to invest $200 million in Virgin Orbit. Those talks collapsed, sources told Reuters last week.

Virgin Orbit’s biggest creditor is London-based Arkit Ltd., which owes it almost $10 million in services and customer deposits.

Arkith declined to comment.

In 2021, Arkit Quantum ( ARQQ.O ) and Virgin Orbit announced a deal for two satellite launches to provide encryption services to the “Five Eyes” countries: the United States, the United Kingdom, Canada, Australia and New Zealand.

Arqit Quantum said in December it was abandoning satellite development efforts and finding a way to provide secure encryption through an unspecified “ground infrastructure.”

The U.S. Space Force, part of the U.S. military, was Virgin Orbit’s second largest creditor, depositing nearly $6.8 million for future launches. There was no immediate comment.

(Reporting by Joey Rowlett in Washington, Jahnavi Nidumolu in Bangalore, Kevin Grolicki in Singapore, Crystal Hu in New York, Joanna Plusinska in London and Tim Heber in Paris; Editing by Jamie Freed, Jason Neely and Jonathan Otis

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