ALEXANDER CAMPBELL / LONDON
But manufacturer likely to be broken up if additional strategic partner is not secured
Fairchild Dornier is hoping that its move into insolvency last week and a proposed German rescue package may protect the it long enough to find a strategic partner.
If the German/US regional jet manufacturer fails to secure a new investor, the company is expected to be broken up.
The manufacturer filed for insolvency in the German courts on 2 April, after the rising development costs of its 728 regional jet family outstripped its ability to pay with revenues from its other aircraft lines and it failed to secure a new strategic investor (Flight International, 19-25 March).
The insolvency move will protect the manufacturer from creditors, similar to the US Chapter 11 process, until court-appointed administrator Eberhard Braun determines whether it can be restructured and a new partner found.
Fairchild Dornier says that in the meantime development of the 728/928 regional jet families will continue, along with production of the 328JET, the Envoy 3 corporate jet, Airbus component manufacture, maintenance and in-service aircraft support. The administrator has already shut down 328JET wing production at its US manufacturing plant and at least 300 of its 700 US employees will be made redundant immediately, says Fairchild Dornier. Its 3,600 German workers' salaries are guaranteed for the next three months by the federal government.
The Bavarian-based manufacturer is confident, however, that a loan package proposed by three German banks - Bayerische Landesbank, KfW and Hupovereinsbank - with partial loan guarantee support from the Bavarian state and federal governments, will buy it enough time to secure a strategic partner in the next three months.
The package is worth $90 million, of which Fairchild Dornier has already received an advance of $20 million. The manufacturer is seeking a partner to take a stake, possibly over 50%. Existing shareholders Clayton, Dubilier & Rice and Allianz Partners, will inject $870 million if a new partner is secured.
The German rescue package, however, will have to pass European Commission (EC) anti-subsidy laws, although it could be exempted through a provision protecting "rescue aid", says the EC. It will take several weeks to make an initial decision, while an in-depth examination would take several months, during which loan guarantees would be frozen.
Aerospace analysts are not hopeful of the company surviving as a whole. Graziano Freschi of PricewaterhouseCoopers says: "If the administrators cannot find a strategic partner, it's more than likely they will pull the plug on the main [airframe] business and look for buyers for the other businesses. "Several manufacturers are believed to be interested in Fairchild Dornier's aerostructures division, but the 728/928 programmes are less appealing, due to the estimated €1 billion ($880 million) needed to finish development and certification.
Source: Flight International