Masten Space Systems files for bankruptcy – SpaceNews | Vette Leader

Updated at 2:25 p.m. Eastern with NASA explanation.

WASHINGTON — Masten Space Systems, a company developing a lunar module for a NASA mission, filed for Chapter 11 bankruptcy on July 28 with plans to sell one of its key assets to a competitor.

Masten filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware. Based in Mojave, California, the company said it had estimated assets of between $10 million and $50 million and estimated liabilities of the same magnitude.

The company is one of five companies to receive the Commercial Lunar Payload Services (CLPS) award from NASA for delivering payloads to the lunar surface. NASA in April 2020 presented an award, originally worth $75.9 million, to masts to bring a series of experiments to the lunar surface with its XL-1 lander. The mission, originally planned for 2022, was postponed to November 2023 due to the company’s June 2021 disclosure of pandemic-related supply chain issues.

“NASA has received notification that its payloads scheduled for delivery aboard Masten Mission One may be impacted by Masten business operations. The agency is working closely with the company to ensure any potential changes comply with Federal Acquisition Regulations,” NASA said in a July 29 statement. “If Masten Space Systems cannot fulfill its mission, NASA will manifest its payloads on other CLPS flights.”

NASA added that the agency paid Masten $66.1 million of the award’s revised value of $81.3 million to date.

Industry sources reported that Masten Space Systems has recently encountered financial problems, forcing the company to furlough its employees for the month of July and laying off many of those working on the XL-1 project.

“Masten intends to use the Chapter 11 process to streamline Masten’s spending, streamline its operations and execute sales processes that maximize value to its unsecured creditors,” said Sean Bedford, general counsel of Masten Space Systems, in a statement to Space News. “We hope this process will allow Masten to continue operations and create value for its customers and the space industry.”

The filing lists SpaceX as the largest creditor in contract to launch the XL-1 lander. According to the filing, Masten owes SpaceX $4.6 million. Other major creditors include Psionic, a developer of navigation systems; another lunar lander company, Astrobotic; NuSpace, an aerospace component supplier; and propulsion company Frontier Aerospace.

Masten states in the filing that it has a “stalking horse asset purchase agreement” for its SpaceX seed loan with Intuitive Machines, another lunar lander company. Such an arrangement ensures a sale of the asset but does not prevent Masten from seeking a better deal. The company said it will sell its other assets through “one or more purchases,” subject to approval by its board of directors.

While Masten states that it intends to continue operations, an external expert sees the situation differently. “This will not be a reorganization,” said Adam Stein-Sapir, bankruptcy expert at Pioneer Funding Group, which is not involved in the case. His review of the filing led him to conclude that Masten’s investors decided to “cut their losses and sell the pieces to willing buyers.”

While Chapter 11 filings are typically associated with reorganizations, they can also be used to liquidate a company. “It gives the debtor a little more control,” he said. A motion to liquidate a Chapter 7 corporation involves a court-appointed trustee who has discretion to determine the disposal of assets. “This allows the management team to exercise a little more control over the execution.”

The stalking horse agreement to sell the start-up loans to Intuitive Machines led him to suspect that the company had been planning Chapter 11 bankruptcy for some time. “That’s well thought out. This is not an emergency room,” he said. “I expect a speedy process.”

In addition to his work on lunar landers, Masten has developed several vertical take-off and landing rockets for use as technology demonstrators. The company had a contract with NASA’s Flight Opportunities program to offer these vehicles to researchers, including NASA itself, who used them to test technology for the Mars 2020 lander.

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