Updated at 2:25 p.m. EST with statement from NASA.
WASHINGTON — Masten Space Systems, a company developing a lunar lander 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. The company, based in Mojave, Calif., said it has estimated assets between $10 million and $50 million and estimated liabilities in the same range.
The company is one of five companies to have won NASA’s Commercial Lunar Payload Services (CLPS) awards for delivering payloads to the lunar surface. NASA awarded a prize initially valued at $75.9 million Masten in April 2020 to deliver a suite of experiments on 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 has been advised that its payloads to be delivered aboard Masten Mission One may be impacted by Masten’s commercial 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 that Masten Space Systems is unable to complete its mission order, NASA will manifest its payloads on other CLPS flights.”
NASA added that of the revised prize value of $81.3 million, the agency has paid Masten $66.1 million to date.
Industry sources reported that Masten Space Systems has recently encountered financial problems, forcing it to lay off its staff for the month of July and lay off many 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 sales processes that maximize value for its unsecured creditors,” said Sean Bedford, Masten’s general counsel. Space Systems, in a statement to SpaceNews. “We hope this process will allow Masten to continue its operations and deliver value to its customers and the space industry.”
The filing lists as its biggest creditor SpaceX, which has a contract to launch the XL-1 lander. Masten owes $4.6 million to SpaceX, according to the filing. 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 he has a “hunting horse asset purchase agreement” for his SpaceX launch credit with Intuitive Machines, another lunar lander company. Such an agreement guarantees a sale of the asset but does not prevent Masten from seeking a better deal. The company said it would sell its other assets through “one or more purchases” to be approved by its board of directors.
While Masten says he intends to continue his operations, an outside expert sees the situation differently. “It won’t 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 case led him to conclude that Masten’s investors had decided “to cut their losses and sell the coins to willing buyers.”
While Chapter 11 filings are typically associated with reorganizations, he said they can also be used to liquidate a business. “It gives the debtor a bit more control,” he said. A Chapter 7 filing to liquidate a business involves a court-appointed trustee who has discretion to dispose of the assets. “It allows the management team to exercise a little more control over the liquidation.”
The stalking horse deal to sell the launch credits to Intuitive Machines suggested to him that the company had been planning Chapter 11 bankruptcy for some time. “It has been thought of. This is not an emergency deposit,” he said. “I expect a quick process.”
In addition to his lunar lander work, 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 donate these vehicles to researchers, including NASA itself, who used them to test Mars 2020 lander technologies.