Dive Brief:

• Aerospace manufacturer Virgin Orbit filed for Chapter 11 bankruptcy after laying off most of its workforce on Monday, the company announced.
• The company, a subsidiary of Virgin Group, laid off about 675 employees to reduce costs, citing its inability to secure funding in a March 30 securities filing. The layoffs affected 85% of its workforce.
• The announcement comes less than three weeks after the company paused operations. Virgin Investments Limited has committed to funding $31.6 million toward Virgin Orbit’s operations as it searches for a buyer amid the bankruptcy process.

Dive Insight:

When Virgin Orbit announced it was pausing operations on March 16, it said it was trying to safeguard capital while the company continued talks for possible funders and strategic opportunities. 

However, it didn’t mean the funders and opportunities were a guarantee. Virgin Orbit had been seeking capital since October, Johanna Kent, vice president of people and culture at Virgin Orbit, said in the WARN letter dated March 30.

“The capital Virgin Orbit sought, if obtained, would have enabled Virgin Orbit to avoid or postpone the separations of employment,” Kent wrote. “Virgin Orbit reasonably and in good faith believed that giving notice of the separation of employment would have precluded Virgin Orbit from obtaining the needed capital from investors.” 

The aerospace manufacturer resumed a portion of its operations on March 23 to prepare for its next mission. Still, the rest of the workforce and operations remained on pause and were anticipated to further resume operations on March 27, according to an SEC filing.

Instead, CEO Dan Hart told employees March 30 that operations had been paused indefinitely, according to a CNBC report.

The workforce reduction is expected to complete on April 3, and Virgin Orbit expects to spend an estimated $15 million to pay out severance packages, according to an SEC filing.

“While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business,” Hart said in a statement. “We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the Company. At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.”