A New Balance of Power In The Recip Market?

ANN is still analyzing documentation but it appears that a sale is being, executed in which long-suffering Texas-based Superior Air Parts is being sold to the mighty forces of Lycoming, in the wakes of a Chapter 11 bankruptcy filing... possible the last we know of, from the embattled 2008 aviation year (we hope)...

The deal is worth 11.5 million dollars and is an asset purchase only... and Superior has filed a Chapter 11 bankruptcy petition (dated 12.31.08 in the docs we've seen) as part of the written agreement describing the sale, "Seller intends to promptly following the date hereof file a voluntary petition under Chapter 11 of the United States Bankruptcy Code commencing a case (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Northern District of Texas and will continue in possession of its assets and in the management of the Business (defined below) pursuant to Sections 1107 and 1108 of the Bankruptcy Code..."

As noted, this is an asset purchase... and not a company takeover. The details of the sale noted below will require Bankruptcy Court Approval in order to go forward. According to the schedules documented so far, this purchase encompasses the following: 

Purchased Assets

1. Regulatory Approvals. All Parts Manufacturing Approvals, Type Certificates, Supplemental Type Certificates, Production Certificates and all other certificates or certifications issued by the FAA, EASA, JAA, CAA or any other Governmental Authority or aviation authority issuing certifications for the design, manufacture, modification and repair of aviation products, and all documentation relating to the same, and all applications for or work-in-progress relating to FAA, EASA, JAA, CAA and similar foreign Governmental Authorities’ certifications, and all documentation relating to the same (the “Regulatory Approvals”), in each case, for or relating to the manufacture, sale and repair of (a) aircraft engines (including the Vantage Engine) and

(b) aircraft engine parts, including those for use on or in connection with Lycoming brand engine products, Seller engine products and Teledyne Continental Motor (“TCM”) engine products (the “Purchased Regulatory Approvals”). For the avoidance of doubt, the Regulatory Approvals identified in Schedule 6.9 are Purchased Regulatory Approvals.

2. Design and Manufacturing Rights. All design and manufacturing rights, design documentation, information and systems, including data files, Data Packs and any supporting specifications, test articles and the like relating to any Non-Certified Engines and Parts.

3. Inventory. All inventories of raw materials, work-in-process, finished goods, demonstration equipment, parts, shipping containers, packaging materials, and other accessories related thereto and other materials that are used or held for use in connection with the manufacture, sale and repair of aircraft engines and aircraft engine parts, including the Certified Engines and Parts and Non-Certified Engines and Parts, excluding, for the avoidance of doubt, any inventory disposed of in the Ordinary Course before the Closing Date in accordance with Section 5.3 and Section 5.4, together with all rights against suppliers of such inventories (collectively, the “Purchased Inventory”).

4. Manufacturing Equipment and Tooling. All machinery, equipment and tooling used or held for use in connection with or necessary for the manufacture and repair of aircraft engines and aircraft engine parts (including Certified Engines and Parts and Non-Certified Engines and Parts) including all manufacturing, production, maintenance, packaging, gages, testing and other machinery, tooling (including dies, jigs, patterns, molds, prototypes and the like) and equipment, spare or replacement parts, computer equipment incidental to the development, design, manufacture, testing and inspection of parts (including all computer equipment, storage media, CAD work stations, servers, hard drives and the like that contain or store Purchased Intellectual Property), engine test cell equipment, specialized inspection and quality control equipment, and plant equipment, and including, for the avoidance of doubt, all such assets identified in Schedule 6.5(b).

5. Other Tangible Personal Property. All other tangible personal property of Seller that is used or held for use in connection with the manufacture, repair and sale of aircraft engines and aircraft engine parts, including Certified Engines and Parts and Non-Certified Engines and Parts.

6. Intellectual Property. Any and all Intellectual Property relating to Seller’s past, present and anticipated design, development, manufacture, assembly, repair, testing, sale, distribution and use of aircraft engines and aircraft engine parts, including Certified
Engines and Parts and Non-Certified Engines and Parts (the “Purchased Intellectual Property”).

7. Claims. All rights, recoveries, refunds, counterclaims, rights of set-off and other rights, choses in action and Claims arising at any time (including any Claims that may exist against suppliers arising from the sale of products or services to Seller) against third parties, including warranty and other contractual rights and Claims (express, implied or otherwise), to the extent related to the Purchased Assets.

Assets EXCLUDED from the sale are documented as follows:

Excluded Assets

1. Excluded Cylinder Assembly Assets. all Regulatory Approvals relating to Seller’s cylinder assemblies for TCM IO-520, TSIO-520, and IO-550 reciprocating engines covered by a proposed FAA Airworthiness Directive (“AD”), Docket No. FAA-2007-0051, including the following part numbers: SA52000-A1, SA52000-A20P, SA52000-A21P, SA52000-A22P, SA52000-A23P, SA55000-A1 and SA55000-A20P, and any other assets, including (a) inventory, raw materials, work-in-process, finished goods, demonstration equipment, parts, shipping containers, packaging materials, and other accessories related thereto and other materials that are used exclusively for or held for use exclusively for the manufacture, sale and repair of such cylinder assemblies and (b) all Intellectual Property used exclusively for or held for use exclusively for the manufacture, sale and repair of such cylinder assemblies.

2. Cash, Cash Equivalents, Securities and Accounts Receivable. All cash, cash equivalents, securities, deposit and other bank accounts, trade accounts receivable and all notes, bonds and other evidences of Indebtedness pursuant to which Seller shall have the right to receive payments (in each case, of any nature whatsoever, whether recorded or unrecorded) arising out of sales of products delivered by Seller and any related security arrangements and collateral securing the repayment or other satisfaction thereof, including any rights with respect to any third party collection procedures or any other Claims that have been commenced in connection therewith.

3. Trademarks, etc. All Trademarks and Domains, including the “Superior” trade names, trademarks, service names, service marks, logos, brand names, and corporate names, and all applications, registrations, and renewals in connection therewith.

4. Claims. Any rights (including indemnification), Claims and recoveries under litigation involving Seller: (i) commenced against third parties arising under Sections 544, 547, 548, 550 and similar “avoidance action statutes” of the Bankruptcy Code; or (ii) that may exist against any third party relating to the Excluded Assets or Retained Liabilities.

ANN has had calls into Superior and Lycoming for a week now and, so far, those calls have not been returned. ANN is looking over some of the documents involved and will have more to report on this story as it develops...

FMI: www.superiorairparts.com, www.lycoming.com