Adam Aircraft grounded permanently

High-tech jet maker Adam Aircraft Industries Inc. filed Chapter 7 bankruptcy on Feb. 15 after burning through at least $159 million in venture funding from the likes of DCM, D.E. Shaw Group and Goldman Sachs & Co.

Goldman Sachs appears to be the biggest loser, having invested about $31 million over seven rounds, according to Thomson Financial (publisher of PE Week). Others who lost big from investing in the Englewood, Co.-based aircraft maker include W Capital Partners ($20 million over four rounds), DCM ($18 million over three rounds), Mesirow Private Equity Investments ($16.1 million over three rounds), Tinicum Capital Partners ($15 million over five rounds) and D.E. Shaw ($14.9 million over two rounds).

Adam Aircraft appeared to get ahead of itself. The company had 800 employees working on its two aircraft models, a twin-engine plane and a jet, but it had not yet received certification from the Federal Aviation Administration to sell the jet. The company claimed it had a backlog for more than 460 orders for its aircraft and was on track to receive FAA approval this year, but it couldn’t convince investors to put up any more money to keep it aloft.

The Aircraft Owners and Pilots Association reported that Adam Aircraft planned to produce three of its twin-engine planes per month starting this summer and up to 15 jets per month once it had FAA certification. The planes were priced to sell at $1.25 million each and the jets for $2.45 million each.

Chris Naro, the company’s CFO, said in February 2007 that Adam Aircraft had raised $182 million in private equity funding and was looking for up to $125 million in debt financing and would need an additional $80 million in equity to reach cash flow break-even.

Adam Aircraft was able to raise $105 million in debt financing from Morgan Stanley, but it couldn’t convince its venture backers to buy more equity. All of the company’s 800 employees will be or have been laid off, and the Chairman and CEO John Wolf resigned effective Feb. 15, the company said in its bankruptcy filing.

The company, named after founder Rick Adam, raised its first round, a $5.13 million infusion, in December 2003 and went on to raise another $154 million in six rounds from 14 investors between 2004 and 2007, according to Thomson.

The company’s bankruptcy petition lists assets of between $1 million and $10 million and debts of between $50 million and $100 million.

It isn’t clear if any of the venture backers own any of the company’s intellectual property or plan to purchase any of its assets during the bankruptcy process and start a new company to produce carbon-composite planes and jets. Among those who have served as members of the Adam Aircraft board are retired Army Gen. Wesley Clark (a former presidential candidate) and Bruce Leadbetter (a partner in Beta Capital Group and co-founder of the defunct Legend Airlines).

At least one other privately held company has raised venture financing to create high-tech jets: Eclipse Aviation Corp. of Albuquerque, N.M.

Eclipse has raised $239 million, most of it from an undisclosed venture investor, as well as Equitek Capital and Sand Hill Capital. Eclipse raised a first round of $38 million at a post-money valuation of $340 million in February 2002 and a second round of $201 million at an undisclosed valuation in June 2007, according to Thomson.

Eclipse’s press materials claim that the company uses advanced technologies and manufacturing to build jets that “cost a fraction of other jets, and provide the lowest cost of jet ownership ever achieved.”