NBAA Convention News

In talks with new investor, Grob pulls out of show

 - October 5, 2008, 3:17 PM

Grob Aerospace is holdings talks in
Europe this week with an undisclosed prospective new investor. The proposed memorandum of understanding would provide fresh capital for Swiss-based parent company Grob AG that would allow it to buy complete control in its insolvent German manufacturing subsidiary, Grob GmbH.
Grob Aerospace pulled out of this year’s NBAA show last Wednesday to allow its management to focus on closing a deal with new investors. CEO Niall Olver is set to make a brief appearance here in Orlando on Wednesday, depending on how negotiations progress on the other side of the Atlantic.
Three weeks ago, a German bankruptcy court gave Olver more time to secure fresh investors for the manufacturer and its SPn midsize business jet program. Insolvency administrator Dr. Michael Jaffé recommended that the company’s bankruptcy protection should be extended beyond an initial 30-day assessment period. Meanwhile, a Swiss court has also agreed to postpone bankruptcy proceedings for its Swiss-based Grob AG parent company, lifting the threat of the company’s assets being liquidated in the near future.
Olver has been in talks with three prospective new investors–one of them from within the aviation industry and the other two being financial groups. He indicated that several other OEMs have shown an interest in acquiring Grob but that they would likely want to break up the company’s assets.
More than ?100 million ($142 million) of new capital will be required to resuscitate Grob. This amount would both replace funds withdrawn by the company’s undisclosed main investor in mid-August and provide additional money to cover the cost of completing certification of the SPn.
“All the [prospective] investors are very happy with the business plan and all are aware of the risks associated with aircraft development programs,” Olver added. Evidently, the former investor had suddenly opted to withdraw financial backing after becoming frustrated with further delays in the SPn program and the rising cost of getting the aircraft into service.

Even if new investment is quickly forthcoming, it remains questionable whether Grob can meet its already revised goal of completing SPn certification by the end of this year. According to Olver, the company needs to increase its technical personnel to get the program back on track. However, he added that Grob still believes that once certification is achieved, it can still reach its production goal of delivering 35 airplanes next year.

The SPn program is backed by more than 100 airplanes, covering more than two years of production output at Tussenhausen-Mattsies, which can produce around 48 units annually. According to Olver, only one customer has asked to cancel its order but other customers, including Alpha Flying’s PlaneSense fractional ownership program with 25 firm orders, are staying with the program. Some customers even have indicated a willingness to become shareholders in Grob through a consortium of various interested parties, but this does not appear to be the most probable source of new funding for the airframer.