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Nordam has reached an agreement to sell its interest in a nacelle program to Gulfstream Aerospace Corp. (GAC) in a move that will pave the way for immediate resumption of nacelle production for the Pratt & Whitney Canada PW800 engines that power the Gulfstream G500 and G600 and ultimately allow Nordam to file a plan to emerge from Chapter 11 bankruptcy protection, according to court documents filed today. Nordam announced its suspension of the PW800 nacelle production on July 5, citing “an impasse” with P&WC, and then filed for Chapter 11 later that month.
Under the agreement, Gulfstream will have “full management authority over the program, and, to the extent that GAC elects, all shared assets and services used by Nordam both in the program and in other non-program operations,” such as personnel and equipment associated with the program. In exchange, Gulfstream would assume $18 million of “third-party vendor and contract counter-party liabilities.”
Nordam asked the court for approval of a related interim funding agreement, which the company said will permit it to “resolve the single-largest issue in these Chapter 11 cases on highly favorable terms for all stakeholders,” facilitating a restructuring plan to emerge from Chapter 11. The interim agreement would enable the license of the intellectual property to Gulfstream in advance of the sale and immediate resumption of production at Nordam's facilities.
Noting “an urgent need to restart this critical aspect of [Gulfstream’s] supply chain,” Nordam asked for approval of the request by September 10 (for production restart then) and the possibility of closing on the sale to Gulfstream by October 31.
“Suspending a customer’s program and impacting them, their customers, our stakeholders and supplier/partners is not something that should ever happen,” Nordam CEO Meredith Siegfried Madden said in a statement. “This solution that we were able to quickly reach with Gulfstream will reduce the impact of the temporary suspension and allow all program activities to resume…This settlement agreement is the best outcome for everyone involved. Gulfstream gets to build its business jets; it allows Nordam to continue under our family’s ownership and leadership; it secures our stakeholders' and company’s future; and allows us to pay all of our suppliers, continuing our strong relationships with them.”
Gulfstream Aerospace has completed its acquisition of the Nordam nacelle line for the G500 and G600, ensuring a consistent production flow for its new aircraft lines and clearing the way for Nordam to exit Chapter 11 bankruptcy protection.
The companies, which announced the finalization earlier in October, reached agreement for the proposed acquisition after Nordam suspended production of the nacelle line in early July, citing “an impasse” with Pratt & Whitney Canada.
The engine maker produces the PW800 variants powering the G500 and G600 and was the original contractor for the nacelles. That original contract, signed in 2010, had called for Nordam to “design, engineer, develop and manufacture inlet, nacelle, thrust reverser, and other components and to combine them with Pratt & Whitney Canada’s PW814 and PW815 engines in arriving at integrated powerplant systems for the [Gulfstream] G500/G600,” according to Nordam.
But, Nordam CEO Meredith Madden said the two companies were not successful in resolving a contract dispute, leading the Tulsa, Oklahoma manufacturer to halt the line. “We are doing what is necessary to remain financially secure, serve our customers, and protect the reputation,” Madden had added.
A P&WC spokesman had responded “Pratt & Whitney has worked diligently for more than a year with our contracted supplier Nordam to resolve their challenges on the PW800 nacelle program. Our objectives have been to minimize the impact on the Gulfstream program and assist our supplier.”
Later in July, Nordam filed for Chapter 11 bankruptcy protection. Gulfstream subsequently stepped in, reaching agreements with Nordam to in the short-term take over the program under an interim financing deal and follow with the outright purchase of the program. Nordam had asked for quick court approval, citing an “urgent need to restart this critical aspect of [Gulfstream’s] supply chain.”
The U.S. Bankruptcy Court for Delaware agreed, approving the interim arrangement in early September and enabling the restart of production under Gulfstream’s purview. The court followed with final approval for the sale on September 26.
While terms of the acquisition were not disclosed, court documents specified that under the agreement Gulfstream would have “full management authority over the program, and, to the extent that [Gulfstream] elects, all shared assets and services used by Nordam both in the program and in other non-program operations,” such as personnel and equipment associated with the program, according to court documents. In exchange, Gulfstream would assume $18 million of “third-party vendor and contract counter-party liabilities.”
“Suspending a customer’s program and impacting them, their customers, our stakeholders and supplier/partners is not something that should ever happen,” Madden had said after reaching agreement with Gulfstream. “This solution that we were able to quickly reach with Gulfstream will reduce the impact of the temporary suspension and allow all program activities to resume…This settlement agreement is the best outcome for everyone involved. Gulfstream gets to build its business jets; it allows Nordam to continue under our family’s ownership and leadership; it secures our stakeholders' and company’s future; and allows us to pay all of our suppliers, continuing our strong relationships with them.”
Manufacturing is remaining at Nordam’s facilities in Tulsa and Madden said 117 workers have been assigned to the program. “Gulfstream is a great customer for Nordam,” Madden said. “Their decision to own and manage this work here at Nordam’s Nacelle & Thrust Reverser Systems facility shows confidence in our stakeholders and is a testament to our capabilities to produce this FAA-certified nacelle system, which has performed very well after more than 6,000 hours of flight tests.”
Pointing to Gulfstream’s 60-year production experience, Gulfstream president Mark Burns added, “The manufacturing of this component is firmly in our wheelhouse, especially since we also manufacture the wings and empennage for these aircraft.”
The restart was particularly critical for Gulfstream, which began deliveries of its ultra-long-range G500 in late September and is closing in on certification for the G600.
As for Nordam, Madden reiterated that the primary issue leading to the Chapter 11 filing was the nacelle production. “Now that this agreement with Gulfstream is in place, that issue goes away. We see blue skies ahead as we aim to exit Chapter 11 by the end of the year.”