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Judge approves Northstar Aerospace sale

by Jamie Mason | Published July 25, 2012 at 3:00 PM

Affiliates of Chicago private equity firm Wynnchurch Capital Ltd. have flown out of court with the assets of aircraft components maker Northstar Aerospace (USA) Inc.

Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Tuesday, July 24, approved the $70 million sale.

Stalking-horse bidders Heligear Acquisition Co. and Heligear Canada Acquisition Corp., affiliates of Wynnchurch, will pay $70 million in cash for all assets of Northstar and affiliates under court protection in Canada.

The sale also received approval on Tuesday in the Ontario Superior Court of Justice in Toronto, Northstar general counsel David G. Anderson said.

Northstar canceled its July 17 auction after it received no qualified competing bids by the July 13 bid deadline, court filings said.

The stalking-horse asset purchase agreement allocates $45.5 million of the sale price to the U.S. assets and the remaining $24.5 million to the Canadian assets. The stalking-horse bidders also will assume certain liabilities.

Under the APA, the sale must close by Aug. 31. According to Anderson, the sale will close shortly.

Northstar has been using debtor-in-possession loans, along with its cash collateral, to fund its operations in Chapter 11.

The U.S. debtors have secured a $22 million senior DIP loan from prepetition lenders led by Fifth Third Bank and a $7 million junior DIP loan from Boeing Capital Loan Corp., an affiliate of Northstar's largest customer, Boeing Co.

Northstar's Canadian debtor affiliates, meanwhile, have a third C$3 million ($3 million) DIP from lenders led by Fifth Third.

Northstar owes $39.5 million on a prepetition revolver and $18.89 million on a prepetition term loan from the Fifth Third group. The debtor also owes $1.6 million on a capital equipment loan.

In addition, the debtors owe C$1.43 million on an interest-free loan from the Federal Economic Development Agency for Southern Ontario, an agency of the Canadian government, and $1.72 million to the Canadian Minister of Industry.

Northstar filed for Chapter 11 on June 14 with three affiliates. The cases have been jointly administered.

Parent company Northstar Aerospace Inc. and certain of its Canadian subsidiaries filed for protection under Canada's Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Toronto on the same day.

Northstar blamed its bankruptcy filing on a severe liquidity crisis caused by low-to-negative profit margins on significant customer contracts, decreases in defense spending and an inability to secure additional funding. As a result, the debtor has been unable to meet its various financial and other covenants with its prepetition secured lenders and doesn't have the liquidity to meet its ongoing payment obligations, court filings said.

Northstar has multiple contracts expiring between 2010 and 2013 without sufficient renewals, extensions or new contracts, causing its revenue to sharply decline. At the same time, the company has remained burdened with unfavorable contracts. It is earning low-to-negative margins on one contract for work on a Boeing helicopter.

The Bedford Park, Ill., company supplies components and assemblies for the commercial and military aerospace markets, including gears, shafts, gearboxes and other related components for helicopter transmissions, helicopter rotor heads, accessory gearboxes for aircraft engines and components for auxiliary power units. The debtors also provide machining and fabrication services for a variety of aerospace applications and maintenance, repair and overhaul services, court papers said.

Northstar operates six production facilities in the U.S. and Canada. It serves both the military and commercial markets, with about 75% to 80% of its revenue coming from defense contracts. Its two largest customers in the defense segment are Boeing and the U.S. government.

Robert E. Richards and Scott E. Koerner of SNR Denton US LLP and Charlene D. Davis at Bayard PA are debtor counsel in the U.S. Jon Nemo of Harris Williams & Co. is the company's investment banker.

Ernst & Young Inc. is the company's monitor in its CCAA proceedings. FTI Consulting Canada Inc. is its chief restructuring officer. Ashley Taylor of Stikeman Elliott LLP is debtor counsel in the CCAA case.

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