Updated 2:25 pm Eastern with NASA statement.
WASHINGTON — Masten Space Systems, a company developing a lunar lander for a NASA mission, filed for Chapter 11 bankruptcy July 28 with plans to sell one of its major assets to a competitor.
Masten filed for Chapter 11 bankruptcy in US Bankruptcy Court for the District of Delaware. The company, based in Mojave, California, reported having estimated assets of between $10 million and $50 million, and estimated liabilities in the same range.
The company is one of five that had won Commercial Lunar Payload Services (CLPS) awards from NASA to deliver payloads to the lunar surface. NASA issued an award originally valued at $75.9 million Masten in April 2020 to deliver a suite of experiments to the lunar surface using its XL-1 lander. The mission, originally scheduled for 2022, was pushed back to November 2023 because what the company said in June 2021 were pandemic-related supply chain issues.
“NASA received notification its payloads slated for delivery aboard Masten Mission One may be impacted by Masten business operations. The agency is working closely with the company to ensure that any potential changes comply with Federal Acquisition Regulations,” NASA said in a July 29 statement. “In the event Masten Space Systems is unable to complete its task order, NASA will manifest its payloads on other CLPS flights.”
NASA added that of the revised value of the award of $81.3 million, the agency paid Masten $66.1 million to date.
Industry sources reported Masten Space Systems encountered financial problems recently, forcing it to furlough its staff for the month of July and lay off many of the people working on the XL-1 project.
“Masten intends to use the Chapter 11 process to streamline Masten’s expenses, optimize its operations and conduct sale processes that maximize value for its unsecured creditors,” Sean Bedford, general counsel of Masten Space Systems, said in a statement to SpaceNews. “We are hopeful that this process will enable Masten to continue operations and deliver value for its customers and the space industry.”
The filing lists as its largest creditor SpaceX, who has a contract to launch the XL-1 lander. Masten owes SpaceX $4.6 million, according to the filing. Other major creditors include Psionic, a developer of navigation systems; another lunar lander company, Astrobotic; NuSpace, an aerospace components supplier; and propulsion company Frontier Aerospace.
Masten states in the filing that it has a “stalking horse asset purchase agreement” for its SpaceX launch credit with Intuitive Machines, another lunar lander company. Such an agreement 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” to be approved by its board.
While Masten says it intends to continue operations, one outside expert sees the situation differently. “This is not going to be a reorganization,” said Adam Stein-Sapir, a 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 usually associated with reorganizations, he said they can also be used to liquidate a company. “It gives the debtor a little more control,” he said. A Chapter 7 filing to liquidate a company involves a court-assigned trustee that has discretion on how to dispose of assets. “This allows the management team to exercise a little more control over the wind-down.”
The stalking horse agreement to sell the launch credits to Intuitive Machines suggested to him that the company has been planning for a Chapter 11 bankruptcy for some time. “This has been thought out. This is not an emergency filing,” he said. “I do expect a quick process.”
In addition to its lunar lander work, Masten has developed several vertical-takeoff-and-landing rockets for use as technology demonstrators. The company had a contract with NASA’s Flight Opportunities program to offer those vehicles for researchers, including NASA itself, which used them to test technologies for the Mars 2020 lander.