[mvanwyk]

What if someone who contracted for a certain price for goods and does not accept the new, higher price and wants a refund of their money?
Let me guess: they can go stand in line with other unsecured creditors, right?
What is the real answer from Van's?

 

[Strikhedonia]

Yes, that is exactly your choice. And what Van's stated in their bankruptcy filing.

 

[vinzer]

I would probably recommend to commit with new price and then sell your kit/spot in line. This will likely save you more $$ vs canceling your order and getting in to the line with other unsecured creditors.

 

[N82VM]

to my knowledge Vans does not allow selling a place in line. You can't just tell Vans I'm out and this new guy is taking over, you deal with it. You still have to pay Vans. They may allow you to change the delivery address. Whatever agreements you come to with a 3rd party is between you and them but I'm pretty sure Vans does not get involved.

 

[GrahamF]

Yes, that is exactly your choice. And what Van's stated in their bankruptcy filing.

And it's important to understand that it means getting pretty much nothing, and that nothing may take a long time to be determined and paid.

Minor unsecured creditors who are not individually important to the future of the business almost always get pennies on the dollar if the don't accept the compromise deal and hold out for what they're owed.

If you have say 10k down, you'll get a few hundred at best.

Far better to take the terms and take delivery, then sell it on. Freshly-delivered kits, as long as they are complete, are likely to have significant resale value.

 

[Jonnyb]

Or you could possibly sell your place inline?
Either way, turning down the “offer” and joining the creditor list should be a last resort.

 

[Desert Rat]

Historically, airplane companies, even kit companies like vans, have refused to transfer line positions. That's to keep people from using them as commodities and speculate for profit while the manufacturer tries to figure out how many items they've actually got customers for.

 

[KayS]

And it's important to understand that it means getting pretty much nothing, and that nothing may take a long time to be determined and paid.

Minor unsecured creditors who are not individually important to the future of the business almost always get pennies on the dollar if the don't accept the compromise deal and hold out for what they're owed.

If you have say 10k down, you'll get a few hundred at best.

Far better to take the terms and take delivery, then sell it on. Freshly-delivered kits, as long as they are complete, are likely to have significant resale value.

but it's not written in stone that your parts will be delivered. nobody can predict today if Vans still exists within next year. you paid already let's say 10K, then Chapter11 happens and you are asked to add 5K or so for the same amount of parts. rejecting the new price means you lost probably 90% of 10K, accepting the new price means that you ventured 15K.

all the folks who made deposits/final payments already etc. were struck by the whole mess completely unaware. no one has a glass sphere. but now shooting additional money into an officially bankrupt system? a company that has to apply to a court when they want to put their coffee machine on ebay?

please don't flame me, i would love to see them survive. but please nobody should hope to make a business case out of it.

 

[maxmirot]

but it's not written in stone that your parts will be delivered. nobody can predict today if Vans still exists within next year. you paid already let's say 10K, then Chapter11 happens and you are asked to add 5K or so for the same amount of parts. rejecting the new price means you lost probably 90% of 10K, accepting the new price means that you ventured 15K.

all the folks who made deposits/final payments already etc. were struck by the whole mess completely unaware. no one has a glass sphere. but now shooting additional money into an officially bankrupt system? a company that has to apply to a court when they want to put their coffee machine on ebay?

please don't flame me, i would love to see them survive. but please nobody should hope to make a business case out of it.

Some skepticism is justified. I don't think CH11 will fail unless they jack up prices so much Van's customer base bails. I think there is greater risk of buying parts and then selling. If many the of customers choose to do this. There could be pile of excess kits on the market

 

[Carlos151]

Chapter 11 is reorganization not liquidation. Their stated goal is to come out the back side of this mess with a viable company. I totally agree with the above posters that if you put your future in the hands of the court you will get pennies on the dollar in return, far down range from today's date. iMHO Vans needs to take accountability for what has happened to rebuild trust that has been completely shattered. Covid made us do it because all of you wanted more airplanes. The primer wasn't our fault, it was those workers in the PI. The LCP issue was the fault of that outside supplier we hired. I see it as a complete failure of management to supervise these outside vendors and provide any semblance of quality control before it was too late, yet I see no mea culpa message coming out. At OSH '23 they surely knew the financial straights they were in yet gladly took money for kit orders. I have a trust problem with that.

This process is going to be painful not only for Vans customers but for their employees, outside vendors and suppliers. All will lose $$$, the question is how much? The business will be rebuilt within a few years, the trust will take a lot longer to return.

 

[GrahamF]

The business will be rebuilt within a few years, the trust will take a lot longer to return.

I hope this doesn't get deleted. It is not bashing, it is not whining, it is not bad-mouthing, it's not social screaming and it's not wanting the world to burn. It's the simple, unemotional, stating of facts without taking a position.

If this plan is approved by the court and things proceed as Van's intend, the customers who are creditors are the ones who eventually pick up the entire tab for getting the company back on it's feet. Van does not lose ownership or control, his prior loans and DIP funding are safe unless the business fails completely and is liquidated. The larger unsecured creditors may have to take a haircut, or they may not.

The enforced price rises for those who have deposits down will, at the bare minimum, equate to those deposits being lost and having to be repaid in order to stay in the game. It is perhaps no coincidence that ~1,500 customer creditors multiplied by some reasonable guesstimate of average individual exposure ($4k) = $6 million.

When it comes to the question of future trust, the question of why customers have picked up the final tab rather than the company and its owners may need answering.

 

[bkervaski]

I hope this doesn't get deleted. It is not bashing, it is not whining, it is not bad-mouthing, it's not social screaming and it's not wanting the world to burn. It's the simple, unemotional, stating of facts without taking a position.

If this plan is approved by the court and things proceed as Van's intend, the customers who are creditors are the ones who eventually pick up the entire tab for getting the company back on it's feet. Van does not lose ownership or control, his prior loans and DIP funding are safe unless the business fails completely and is liquidated. The larger unsecured creditors may have to take a haircut, or they may not.

The enforced price rises for those who have deposits down will, at the bare minimum, equate to those deposits being lost and having to be repaid in order to stay in the game. It is perhaps no coincidence that ~1,500 customer creditors multiplied by some reasonable guesstimate of average individual exposure ($4k) = $6 million.

When it comes to the question of future trust, the question of why customers have picked up the final tab rather than the company and its owners may need answering.

I can't speak for Doug but I think he created the "Chapter 11" forum so everybody can discuss, learn, and vent. [ed. Yes. dr]

Regarding "trust" ... Vans didn't sell to the Chinese ... so there's that ... this could have gone in a very different, very bad direction fast ... A lot of us know these folks and they genuinely care about customers.

I'm not defending the situation, it is what it is, a series of unfortunate events that put this company and its customers firmly between a rock and a hard place.

 

[Pilot135pd]

iMHO Vans needs to take accountability for what has happened to rebuild trust that has been completely shattered. Covid made us do it because all of you wanted more airplanes. The primer wasn't our fault, it was those workers in the PI. The LCP issue was the fault of that outside supplier we hired. I see it as a complete failure of management to supervise these outside vendors and provide any semblance of quality control before it was too late, yet I see no mea culpa message coming out. At OSH '23 they surely knew the financial straights they were in yet gladly took money for kit orders. I have a trust problem with that.

The business will be rebuilt within a few years, the trust will take a lot longer to return.

BINGO !! TRUST & ACCOUNTABILITY ARE EVERYTHING !!!

 

[Pilot135pd]

Regarding "trust" ... Vans didn't sell to the Chinese ... so there's that ... this could have gone in a very different, very bad direction fast ... A lot of us know these folks and they genuinely care about customers.

Didn't sell to the Chinese, YET. They have a funny way of showing they care for their customers. Why haven't they accepted responsibility instead of blaming Covid and outside vendors, when they should have been paying more attention to their business?

I think some depositors are in that state of mind where they were just dumped by a cheating girlfriend and don't believe she did that so are justifying her, while others have moved on and are seeing how she treated them the past few months and are understandably upset.

 

[jandetlefsen]

Historically, airplane companies, even kit companies like vans, have refused to transfer line positions. That's to keep people from using them as commodities and speculate for profit while the manufacturer tries to figure out how many items they've actually got customers for.

CubCrafters does it. But there is no room for markups. They simply take your order and offer it to the next in line. If they accept you get a refund and next one takes over you order. It's not a right to refund. If they find no buyer then you still have to pay for it.

 

[Jonnyb]

When it comes to the question of future trust, the question of why customers have picked up the final tab rather than the company and its owners may need answering.

Isn't it always the way?
If Vans had the money and didn't have to hike prices for customers with deposits down, they would hike prices for new customers, with an even bigger mark up to cover the losses they just incurred by not forcing new contracts on those with deposits.
In the end, the customer always pays.

 

[Pilot135pd]

Isn't it always the way?
If Vans had the money and didn't have to hike prices for customers with deposits down, they would hike prices for new customers, with an even bigger mark up to cover the losses they just incurred by not forcing new contracts on those with deposits.
In the end, the customer always pays.

But that's how it's normally done. A 2023 car sold now costs more than a 2020 car, but the dealer doesn't charge the 2020 owner more for his now.

 

[GrahamF]

Isn't it always the way?
If Vans had the money and didn't have to hike prices for customers with deposits down, they would hike prices for new customers, with an even bigger mark up to cover the losses they just incurred by not forcing new contracts on those with deposits.
In the end, the customer always pays.

But usually in Chapter 11, the company owner loses a significant amount of their ownership (and often overall control) in the course of obtaining DIP financing. Thus the creditors at least feel they are not the sole losers.

In this instance that isn't happening.

 

[Bavafa]

Regarding "trust" ... Vans didn't sell to the Chinese ... so there's that ... this could have gone in a very different, very bad direction fast ... A lot of us know these folks and they genuinely care about customers.

I am not sure if I see the logic in this, plus if Chinese can buy it and make it better company without breaking their promise to the existing customer, that would that be caring more for the customers.

I suppose a more fair approach and caring for customers would be to raise the price very modestly/absolute minimum for those customers who already have a contract in hand and put a deposit for an agreed price but raise it to the amount they need to be profitable for the future customer.

 

[Jonnyb]

But usually in Chapter 11, the company owner loses a significant amount of their ownership (and often overall control) in the course of obtaining DIP financing. Thus the creditors at least feel they are not the sole losers.

In this instance that isn't happening.

To be fair, we don't know that isn't happening. We don't really know who owns Vans Aircraft and in what proportion. But Van himself has been very clever in the way this is set up. I have the feeling, that whichever way this goes, he will walk away with everything.
There will be losers, mainly the people who own the other share of Vans Aircraft, we think it's the staff, but maybe only the management? And if that is the case, the main "losers" in this are the ones that caused the issues in the first place.
A lot of conjecture in my post. I don't know how the ownership of Vans is set up.

 

[gap]

If this plan is approved by the court and things proceed as Van's intend, the customers who are creditors are the ones who eventually pick up the entire tab for getting the company back on it's feet.

I don't think that's really fair. Owners, including Van, will almost certainly see their existing shares wiped out. This is an employee-owned company, so every employee's stake will be worthless. Poof!

Yes, Van will likely end up owning part of the reorganized company, but that's because he's financing the reorganization to the tune of $6 million and this loan will probably be converted to equity. He's not getting ownership for free... he's investing $6 million for it.

And all creditors will probably take a haircut. Lycoming, Hartzell, Stein, etc.

So no, customers who are creditors will NOT be picking up the entire tab. Most of the tab is being picked up by Van himself... he's paying $6M to retain partial ownership in the company, rather than lose it all.

 

[flyrlfs]

Bitter taste

Sorry for venting..
But this process is just leaving me very frustrated.
Vans is using the CH11 blanket to cover their own mistakes. Vans is asking to unilaterally cancel all existing orders without providing refund. And, they'll allow us to resubmit a new order using our existing deposit. The terms of the new order will be at their discretion, which is *not* specified in the court request. So at some future date, they get to dictate the $$ they want us to pony up, without court approval. I've read the court filings. Tomorrow is their court hearing. Vans is requesting an immediate court approval for the contract cancellation. Vans knows that filing a claim to get deposits back is a years long effort and no guarantee we get anything.
PS: I mention Vans, because they are the filers. I know a turnaround expert is involved and they'll be more ruthless in executing to Vans benefit because it helps them as well.

 

[GrahamF]

I don't think that's really fair. Owners, including Van, will almost certainly see their existing shares wiped out. This is an employee-owned company, so every employee's stake will be worthless. Poof!

Yes, Van will likely end up owning part of the reorganized company, but that's because he's financing the reorganization to the tune of $6 million and this loan will probably be converted to equity. He's not getting ownership for free... he's investing $6 million for it.

And all creditors will probably take a haircut. Lycoming, Hartzell, Stein, etc.

So no, customers who are creditors will NOT be picking up the entire tab. Most of the tab is being picked up by Van himself... he's paying $6M to retain partial ownership in the company, rather than lose it all.

{Deleted - I shouldn't have opened with that line}

Where is the ownership stake that you suggest they're losing being transferred to? For someone to lose their ownership stake, someone else has to acquire it. It doesn't just evaporate into thin air "because Chapter 11".

Usually in Chapter 11 the party providing DIP funding takes a big ownership stake in exchange for providing that funding (often so much that the original owner loses control) but here the DIP funder and the owner are one and the same (Van) so there is no net transfer of ownership. If there were a transfer of ownership, you would see it in the court filing (i.e. party X is providing $Y of DIP funding in exchange for Z% of the company).

Van is not 'investing' $6m. He doesn't get any further stake for that money, indeed he's widely understood to own ~60% of the company so there almost certainly isn't anywhere near $6m more of it left to buy!

The employee ownership is almost certainly nominal and not controlling. Maybe Greg or Rian have 5% each personally as some sort of key employee retainer. How mad would Van have to have been to have transferred it out of his control, even if there were any chance of an employee scheme (100 employees, mostly blue collar) working up the funds necessary to buy a significant share of a company turning over $50m+ a year.

He's lending the company $6m. [ed. Remove the sentence that violated the posting rules. My call. dr] {Sorry Doug} He's a super-priority creditor and has lent after the filing (although this is a pre-pack in all but name) so his money is at no risk unless it collapses into Chapter 7 in the next few months. He gets it all back eventually, as the highest priority creditor.

I doubt the major creditors (Lycoming, Hartzell) will take a haircut. They are sole-source vendors, i.e. you can't just go down the road - if they decide not to work with you anymore you are screwed.

The big question is the fiddling of the top 20 creditors list and the work that appears to have gone into preventing any customer appearing on it.

 

[Desert Rat]

CubCrafters does it. But there is no room for markups. They simply take your order and offer it to the next in line. If they accept you get a refund and next one takes over you order. It's not a right to refund. If they find no buyer then you still have to pay for it.

Sorry, yes. I should have said most aircraft manufacturers don't let you sell a position. This is to prevent trying to grab a spot in a long lead time item, then selling that spot for a profit to somebody who would rather pony up extra $$$ than take a spot at the back of the line. Most everybody will allow you to walk away but they may keep the part of the deposit that they call "liquidated damages" if their isn't a next guy in that particular line.

 

[mvanwyk]

You would really need to have a lot of faith to send more money to Van's (how do you know it's not good money after bad?), and then be told to expect a long time - months - before you get your stuff, if ever.
[ed. Remove a sentence that violated the rules inmy opinion. Doug.]

 

[maxmirot]

Sorry for venting..
But this process is just leaving me very frustrated.
Vans is using the CH11 blanket to cover their own mistakes. Vans is asking to unilaterally cancel all existing orders without providing refund. And, they'll allow us to resubmit a new order using our existing deposit. The terms of the new order will be at their discretion, which is *not* specified in the court request. So at some future date, they get to dictate the $$ they want us to pony up, without court approval. I've read the court filings. Tomorrow is their court hearing. Vans is requesting an immediate court approval for the contract cancellation. Vans knows that filing a claim to get deposits back is a years long effort and no guarantee we get anything.
PS: I mention Vans, because they are the filers. I know a turnaround expert is involved and they'll be more ruthless in executing to Vans benefit because it helps them as well.

"I know a turnaround expert is involved and they'll be more ruthless in executing to Vans benefit because it helps them as well."

Who knows how their fee is structured? I would not assume they are necessarily a bad actor. Remember the process is overseen by a judge
They are consultant and do real work and have expertise. They deserve payment like everyone else.

" Vans is asking to unilaterally cancel all existing orders without providing refund. And, they'll allow us to resubmit a new order using our existing deposit."

Yep all this sucks.
I am glad to see it is CH 11 not CH7. Then Van's closes their door forever. The property is sold off. Then equipment and materials go to auction. Most likely no more kits unless there is buyer for the IP.
Often unsecured creditors get nothing in CH7. I think there are more options for customers. Continue to build at a higher price or partial refund. The partial refund is unknown and could be zero. I think it is likely to better than CH 7. No experience here.

 

[flyrlfs]

"I know a turnaround expert is involved and they'll be more ruthless in executing to Vans benefit because it helps them as well."

Who knows how their fee is structured? I would not assume they are necessarily a bad actor. Remember the process is overseen by a judge
They are consultant and do real work and have expertise. They deserve payment like everyone else.

" Vans is asking to unilaterally cancel all existing orders without providing refund. And, they'll allow us to resubmit a new order using our existing deposit."

Yep all this sucks.
I am glad to see it is CH 11 not CH7. Then Van's closes their door forever. The property is sold off. Then equipment and materials go to auction. Most likely no more kits unless there is buyer for the IP.
Often unsecured creditors get nothing in CH7. I think there are more options for customers. Continue to build at a higher price or partial refund. The partial refund is unknown and could be zero. I think it is likely to better than CH 7. No experience here.

Fair enough. I don't know how the turnaround exec is compensated. Could be performance based. Could be straight hourly.

Vans had many other options to solving this. Asking for bigger deposit would clearly have helped. May not solve the kit cost issue right away.

Yes, the court has final say. I'm waiting to hear what transpires at the hearing tomorrow. Vans presents their papers as the 'only solution' to their plight. I suspect the courts will accept that position.

 

[blaplante]

Back to Refunds...

My last full time job was at a company that went bankrupt. I don't recall which chapter xx but it did reorganize and continue operations in the end. The court appointed a receiver. Without approval from the receiver NO MONEY COULD BE SPENT. The receiver confiscated the company blank cheques and reported to the judge. Full stop.

I *suspect* (don't KNOW), that the situation will be similar at Van's. Part of the court's responsibility is that they money doesn't get drained out of accounts and pushed to people who aren't at the top of the pecking order. As this is a chapter 11, some of that important stuff is to pay the utility bills, make payroll, layoff staff, etc.

This is probably why VAN'S doesn't have a policy statement on refunds yet. That policy needs to be proposed, and approved by the judge. Don't expect a decision on that instantly. The court will need time to come up to speed on the financial situation to avoid committing to pay out money recklessly.

Humor side bar... that company I was at... owner and CEO went out and hired staff while under receivership. The result of unapproved expenditure? The owner/ceo was removed. Keys, badge, systems access removed. Still 'owner' but kicked out the door.

 

[GrahamF]

Fair enough. I don't know how the turnaround exec is compensated. Could be performance based. Could be straight hourly.

Vans had many other options to solving this. Asking for bigger deposit would clearly have helped. May not solve the kit cost issue right away.

Yes, the court has final say. I'm waiting to hear what transpires at the hearing tomorrow. Vans presents their papers as the 'only solution' to their plight. I suspect the courts will accept that position.

His compensation can be seen clearly in the projected cash flow for the next 13 weeks that has been filed with the court. Significant six figure sums. The lawyers fees are also in the court paperwork.

 

[airguy]

plus if Chinese can buy it and make it better company without breaking their promise to the existing customer, that would that be caring more for the customers.

This joke wins the internet for today!

 

[airguy]

Usually in Chapter 11 the party providing DIP funding takes a big ownership stake in exchange for providing that funding (often so much that the original owner loses control) but here the DIP funder and the owner are one and the same (Van) so there is no net transfer of ownership.

Correct me if I'm wrong - but I believe at this point all we have from Van is an OFFER of DIP funding - probably one among many - the Court has to select/approve which one is accepted.

 

[Jonnyb]

Correct me if I'm wrong - but I believe at this point all we have from Van is an OFFER of DIP funding - probably one among many - the Court has to select/approve which one is accepted.

Plus we don’t know how much of the company Van himself owns. The “owners” may well be taking a bath on the back of this.

 

[dmattmul]

Outside Investors

I am not sure if I see the logic in this, plus if Chinese can buy it and make it better company without breaking their promise to the existing customer, that would that be caring more for the customers.

.

Look at Cirrus, Chinese owned since 2011 went from marginal financials (At one time they were contemplating a bankruptcy filing, owed back rent of well over a year) to securing a Collier trophy 6 years later. Seem to be doing very well and carrying on the tradition the founders started.

 

[Overshoot]

Correct me if I'm wrong - but I believe at this point all we have from Van is an OFFER of DIP funding - probably one among many - the Court has to select/approve which one is accepted.

Van is in his mid 80’s, the structure of any offer will receive great scrutiny. I don’t know if he has heirs, or the trust that he has certainly used to protect his wealth would be sourced.

People keep assuming “China”. Given a geopolitcal environment that is far different than when the GA manufacturers imbibed, are we sure that’s even a player today?

 

[Carlos151]

Look at Cirrus, Chinese owned since 2011 went from marginal financials (At one time they were contemplating a bankruptcy filing, owed back rent of well over a year) to securing a Collier trophy 6 years later. Seem to be doing very well and carrying on the tradition the founders started.

Apparently you haven't looked too closely at Cirrus. Under the flashy exterior lies a large amount of corrective maintenance both for their SR22 and their Vision jet mainly associated with their engines. Just ask any of those owners how often their aircraft is in the shop, especially the Vision jet. IMHO Cirrus is a Chinese house of cards waiting to collapse.

I would much rather have Vans stay away from ANYTHING related to China but then again it's not my choice

Remove one of the wing inspection covers on my -8 and this is what you'll see.

 

[GrahamF]

Plus we don’t know how much of the company Van himself owns. The “owners” may well be taking a bath on the back of this.

Right, from the hearing we now know that he’s the majority shareholder - as I already told you was Prob99 the case. The is simply no reason on earth he would ever have given up overall control.

As the DIP, he has an exclusivity period to propose a plan. Variously 90 days or 180 days depending on whether certain criteria apply. No-one else can propose a plan at this point, and likely this plan will be approved before anyone has a chance.