ALBUQUERQUE, N.M. (AP) -- Eclipse Aviation says it will not oppose a motion filed in federal court by senior noteholders to convert the Albuquerque aircraft manufacturer's bankruptcy proceedings to Chapter 7, a further indication the company will likely be liquidated.
Senior secured noteholders filed the motion in U.S. Bankruptcy Court in Delaware on Tuesday after, they say, it became clear Eclipse's buyer, European-based EclipseJet Aviation International Inc., was unable to obtain financing for the purchase.
U.S. Bankruptcy Judge Mary Walrath ordered a hearing next Wednesday on the motion. Objections to the motion could be presented before and at the hearing.
Walrath must approve the motion before a Chapter 7 bankruptcy can proceed.
Eclipse Aviation said in a news release Wednesday: "The company does not plan to contest the motion."
Eclipse president and general manager Michael McConnell noted the news release referred to Eclipse Aviation. Asked whether EclipseJet or its affiliate, ETIRC Aviation, would contest the motion, he said: "I'm not aware of anyone who will contest it."
McConnell -- who said he was working in a darkened office in the company's locked up Albuquerque headquarters -- said Eclipse's staff was reduced to nine employees Wednesday from about 50 unpaid workers a day earlier.
"It's a very sad, somber day," he said.
The maker of the Eclipse 500 is the lone victim among U.S. general aviation manufacturers during the recent economic downturn, said Katie Pribyl, a spokeswoman with the Washington, D.C.-based General Aviation Manufacturers Association.
"We do hope this is an isolated event. We are extremely, extremely sad to see Eclipse have to close their doors," Pribyl said. "We don't see this as a slippery slope that we'll be heading down."
Pribyl said general aviation manufacturers have lost nearly 11,000 workers since November and orders for aircraft have slowed down. While total shipments were down nearly 7 percent in 2008, total billings for aircraft were up 14 percent compared with a year earlier, she said.
In Eclipse's case, the manufacturer needed investor financing to keep its doors open. As credit markets tightened, Eclipse filed Chapter 11 bankruptcy protection Nov. 25 and counted on ETIRC, its largest shareholder, to obtain financing to buy the company.
"I do not associate Eclipse with what happened with the overall demand for aviation aircraft," McConnell said. "It's more a function of the global financial markets being very unstable and that prevented the closing of the transaction."
According to court documents, ETIRC chairman Roel Pieper repeatedly assured investors that Russia's state-owned Vnesheconombank would provide funding for Eclipse, which had planned to build an assembly plant in Ulyanovsk, Russia.
Pieper had assured investors several times earlier this month that Eclipse's funding "was receiving attention at the highest levels of the Russian government, including from Prime Minister (Vladimir) Putin."
Putin's press secretary and a spokesman for Vnesheconombank were not available for comment late Wednesday in Moscow.
Pieper also did not immediately respond to a request for comment.
Keith Spondike, who said as of Wednesday he is no longer working for Eclipse, said he thinks Pieper was still in Russia trying to get the funding. McConnell declined to confirm that.
Airline industry analysts and a bankruptcy attorney dismissed suggestions a "White Knight" could still rescue Eclipse, which had planned to close its sale to EclipseJet by Jan. 30.
"There are a lot of people who choose to believe in Santa Claus at a surprisingly advanced age," said analyst Richard Aboulafia of the Virginia-based Teal Group Corp. who has been critical of Eclipse's business model for years.
"There's a great chance that people will learn from this and there will never be such an awful program again. That's the only up side," he said.
Albuquerque business bankruptcy attorney Bill Davis, who has followed the Eclipse case, said he believes the judge will grant the motion for Chapter 7 bankruptcy because it was filed by insiders, who are the most knowledgeable about the company's finances. Also, a court exhibit showed the company had used up cash it had when it started Chapter 11 proceedings, he said.
"When there's a motion to convert and the company is not contesting, it's 99 percent certain the case will be converted" to Chapter 7, said Davis, who is not representing anyone in the case.
Doug Royce, an aerospace analyst for Connecticut-based Forecast International Inc., which had forecast production of the Eclipse 500 would end this year, agreed a last-minute save for the company was unlikely, especially given the nation's economic troubles.
"I don't see it happening. There are too many better investment options than investing in business aircraft when there's a major downturn in the business climate," he said.
McConnell said Eclipse managed to create a new market for what it called the very light jet, or VLJ.
Eclipse was the first company in 2006 to receive a provisional certification by the Federal Aviation Administration for its six-seat Eclipse 500, though Cessna Aircraft Co. was the first manufacturer to deliver such a jet to a customer, beating Eclipse by two months. The planes were defined at the time as single-pilot jets that weigh 10,000 pounds or less. They generally have two engines, five or six passenger seats and automated cockpits.
"We gave it a heck of a try," McConnell said. "I wouldn't change anything. It's been a heck of a ride. At the end of the day, we showed that there is a market for a very small jet aircraft."