Sir Richard Branson is injecting $10.9mn into Virgin Orbit as the troubled rocket launch company sacked 85 per cent of its workforce, having failed to clinch rescue funding from new investors.
Chief executive Dan Hart told employees earlier on Thursday that the company would cease operations indefinitely.
Branson’s investment arm, Virgin Investments, has injected enough money to pay most of the severance for roughly 675 staff, said one person close to the deal, leaving just 100 employees to keep the company going while chief executive Dan Hart makes last-ditch efforts to execute a deal.
The company has been in talks with at least one financial investor in recent days.
According to a filing with the US Securities and Exchange Commission, Virgin Orbit estimates it will incur charges of some $15mn related to staff lay-offs.
Branson’s injection was made via a senior secured convertible bond, which gives Virgin Investments “first-priority security interest on substantially all of [the company’s] respective assets, including all aircrafts, aircraft engines (including spare aircraft parts) and related assets, other than certain customary excluded assets” should Virgin Orbit be forced to file for Chapter 11 bankruptcy. This now appears increasingly likely after Hart’s announcement.
Virgin Orbit, spun out of Branson’s Virgin Galactic in 2017, in mid-March announced it was furloughing employees for a week while it sought emergency funding.
The group has been strapped for funds since spring of last year. It came to market through a special purpose acquisition company in 2021, valued at close to $4bn. But it only raised $220mn against expectations of $300mn-$400mn. Then a failed launch from the UK set back plans to take the mobile launch system global, further stressing company finances.
Virgin Orbit had been hoping the UK launch would open up the international market for its unique system. The company has developed the world’s only operational horizontal launch capability, flying a rocket under the wing of a converted Boeing 747 jumbo jet to an altitude of 35,000ft. The rocket is then released to fly the satellites to space.
Virgin Orbit insiders told the Financial Times that the company was burning through some $50mn a quarter. Branson has invested more than $1bn in Virgin Orbit since its founding, including $60mn since November.
Virgin Orbit reported a net deficit in November of $43.6mn for the third quarter of last year, against a loss of $38.6mn in the comparable period of 2021. The free cash outflow also increased from $39.5mn to $52.5mn. However the company last year struck a “strategic agreement” with Spire Global for multiple launches starting in 2023. It has also declared a binding backlog of contracts valued at $143.1mn.
Source: Financial Times