Magellan Aerospace, Middletown - Chapter 11 Bidding Procedures Summary

Bidding Procedures Summary

Sale Process Overview

• Magellan Aerospace, Middletown, Inc. is asking the court to approve procedures for selling substantially all of its assets, in whole or in parts, with no stalking horse bidder in place. Bids are due Nov. 24, 2026, an auction (if needed) is set for Dec. 1, 2026, the sale hearing is set for Dec. 9, 2026, and closing must occur by Dec. 17, 2026.
• The motion was filed Oct. 8, 2026, and will be heard at the Oct. 22, 2026, omnibus hearing. Both the bid procedures order and the sale order are proposed forms that have not been entered.
• The debtor may designate one or more stalking horse bidders through Nov. 10, 2026. Bid protections are capped at a break-up fee of 3% of the cash portion of the stalking horse bid plus up to $150,000 of expense reimbursement.
• The debtor says it has not yet decided whether a sale will produce the maximum recovery for creditors. It is using the marketing process to decide between a sale and a potential reorganization, and it may end the sale process if an alternative transaction, such as confirmation of a plan, is in the estate's best interest. It may also amend the bid procedures at any time, including extending or changing any date.

Parties Involved

• Magellan Aerospace, Middletown, Inc. is the seller. Its parent is Magellan Aerospace USA, Inc.
• No stalking horse bidder has been designated.
• Rock Creek Advisors, LLC is the financial advisor. It runs the marketing process, coordinates diligence and receives bids.
• Manatt, Phelps & Phillips, LLP is proposed counsel to the debtor, and FBT Gibbons LLP is local counsel.

Background and Marketing Process

• The debtor operates an aerospace manufacturing facility in Middletown, Ohio, where it makes jet engine nacelles, exhaust components and heat-resistant space products. It is a contractor to the U.S. government, including the Department of Defense, and performs work supporting national defense and other government programs.
• For decades the debtor struggled to win significant new business, and its revenue declined. Its problems grew worse with litigation over alleged environmental liabilities, which the motion describes as historic liabilities inherited from predecessor locations in California that have not been used in the business for decades. They grew worse again when its parent, Magellan Aerospace USA, made clear it would no longer fund the debtor's continued losses. The debtor filed for Chapter 11 on July 22, 2026.
• Before filing, the debtor hired Rock Creek to market its assets, organize diligence, set up bidding and auction procedures, and communicate with potential buyers. With Rock Creek, the debtor began a formal sale process on Sept. 8, 2026, marketing the assets as a going concern. Certain parties have since signed nondisclosure agreements as a condition to receiving diligence, including access to an online data room. The debtor says that, given its current finances and the significant expenses of its operations, time is of the essence in completing a sale.

Assets Being Sold

• Bidders may bid on substantially all of the debtor's assets, or any portion or combination of them, including certain executory contracts and unexpired leases. Depending on whether the assets sell in whole or in parts, there may be one or more sale orders.
• No purchase agreement exists yet. The debtor will draft a form asset purchase agreement, give it to parties that express interest and post it in the data room. Bids must mark up that form, or any stalking horse agreement. Assumed liabilities and excluded assets will be defined in the winning bidder's purchase agreement.
• The assets will be sold "as is, where is," without representations or warranties except as provided in a court-approved sale agreement. They will be sold free and clear of liens, claims, encumbrances and other interests to the maximum extent section 363 permits, with those interests attaching to the net sale proceeds with the same validity and priority. A party that does not object is deemed to consent to the free-and-clear sale.

Stalking Horse and Bid Protections

• Break-up fee: up to 3% of the cash portion of the stalking horse bid
• Expense reimbursement: up to $150,000
• The debtor may sign one or more stalking horse agreements by Nov. 10, 2026, at 6 p.m. (prevailing Eastern Time), to set a minimum qualified bid for the auction.
  • The debtor designates a stalking horse by filing a notice with the court.
  • Objections to the designation and the bid protections are due by 4 p.m. on the third business day after the notice is filed.
  • The court will hear any objection no later than Nov. 20, 2026.
  • If no one objects, the debtor may submit a stalking horse order under certification of counsel.
• Any stalking horse bid is automatically treated as a qualified bid, and the stalking horse need not include the statement other bidders must give waiving any fee or reimbursement. Unless the court orders otherwise, no other bidder is entitled to a break-up fee or expense reimbursement. Substantial contribution claims based only on submitting a bid are deemed waived.
• Approval of a stalking horse agreement does not limit any party's right to object to the sale or the form of sale order through the global objection deadline.

Good Faith Deposit

• Deposit: the greater of 10% of the total cash consideration, including amounts to be paid for cure costs, or $1.5 million
• The debtor holds deposits in escrow. The motion says escrowed deposits do not become estate property unless the court orders their release or the winning bidder breaches its agreement.
• The winning bidder's deposit is held until closing and credited against the cash purchase price, including any deposit made up of a credit bid.
• Other qualified bidders get their deposits back on the fifth business day after the sale order is entered. The back-up bidder gets its deposit back on the fifth business day after closing, provided it is not required to close.
• If the winning or back-up bidder fails to close because of its own breach or failure to perform, the debtor may keep its deposit as part of its damages.

Overbid

• Minimum overbid increment: $500,000 for substantially all of the debtor's assets. The debtor may change the increment for any round, announcing it at the auction.
• If a stalking horse is designated, a competing bid for its assets must exceed the stalking horse bid by more than the break-up fee and expense reimbursement, plus the minimum overbid. The debtor will factor in the bid protections when valuing later bids.

Bid Requirements

• A qualified bidder must have an unconditional financing commitment from a reputable financing institution, or other evidence satisfactory to the debtor that it can close without financing. Subject to the debtor's waiver, a bid must, among other things:
  • Identify the assets to be bought, with a purchase price allocated to each asset, the liabilities to be assumed (including all cure amounts) and every executory contract to be assumed and assigned.
  • Include signed transaction documents plus a markup of the form purchase agreement (or any stalking horse agreement) and of the proposed sale order.
  • Include written evidence of available cash or committed financing, and of the bidder's financial and operational ability to close and to pay all undisputed cure amounts.
  • Include evidence of adequate assurance of future performance in a form that can be shared immediately with contract counterparties, which must be delivered by Nov. 30, 2026, at 2 p.m. to any counterparty that requests it through debtor's counsel, and list any agreements in the bid that the bidder says are not subject to section 365.
  • Contain no contingencies, including financing, unfinished diligence or corporate, stockholder or internal approval, and include evidence of board (or comparable) authorization.
  • Stay irrevocable until another bidder closes a deal for the same assets, and commit the bidder to abide by the bid procedures, not to bid or seek to reopen the auction after it concludes, and to serve as back-up bidder if its bid is the next highest or otherwise best.
  • Come with the good faith deposit and a completed IRS Form W-8BEN-E or W-9.
  • Commit the bidder to make, and pay the fees for, all required regulatory, antitrust and other filings.
  • Show the bid is reasonably likely to close on a timeline the debtor accepts, including closing by the Dec. 17, 2026, outside closing deadline.
  • Expressly disclaim any break-up fee, termination fee, expense reimbursement, substantial contribution claim or reimbursement under section 503(b), with the bidder bearing its own costs.
  • Acknowledge there has been no collusion and that the bid is a good faith, bona fide offer; submit to the bankruptcy court's jurisdiction and waive a jury trial; name the representatives authorized to act at the auction; and include a signed confidentiality agreement.
• Bids must reach Rock Creek by the Nov. 24, 2026, bid deadline. The debtor may extend that deadline in its sole discretion and will tell every bidder that signed a confidentiality agreement.

Participation, Diligence and Facility Access

• To get the form purchase agreement and data room access, an interested party should give Rock Creek:
  • a signed confidentiality agreement;
  • a statement of bona fide interest naming the target assets and giving a nonbinding indicative price;
  • information on its financial capacity and required authorizations, including current audited financial statements; and
  • any other information Rock Creek reasonably requests.
• Access is granted within two business days after the debtor decides the party has a bona fide interest. A party that skips these steps may still submit a qualified bid, but the bid must include a signed confidentiality agreement.
• Every part of the process, including diligence, facility visits, the auction and closing, must comply with the debtor's Government Contractor Compliance Policy. That policy governs how the debtor protects controlled technical data, export-controlled information and other sensitive materials. The process must also comply with federal export control, national security and government contracting rules.
  • Anyone who wants to visit the facility must first send Rock Creek a nonbinding indication of interest at least three business days before the visit. It must state, at a minimum, the assets to be bought, the price, the form of consideration, the closing date, the requesting party and each person who needs access.
  • The debtor may condition, limit or deny facility access, including by requiring extra screening, documentation or supervision. It may also withhold or restrict access to information, parts of the facility or personnel as needed to comply with the policy or the law.
• Beyond the data room, the debtor may provide further diligence through the bid deadline, with all requests going through Rock Creek. Any written material given to one party will be given to all interested parties and any stalking horse at the same time. A party loses diligence access if it does not become a qualified bidder by the bid deadline, if the process is terminated, or if it materially breaches its confidentiality agreement. The debtor may withhold sensitive materials, particularly from competitors or their affiliates.
• Parties submitting qualified bids, including any stalking horse, may not discuss the sale process with each other without the debtor's prior written approval. The debtor's professionals may attend or be copied on any such communication, and the debtor may disqualify parties that communicate without consent.

Auction

• If the debtor receives at least two qualified bids (including any stalking horse bid) for any assets, it may hold an auction on Dec. 1, 2026, at 9 a.m. The auction may be held electronically, by phone or at FBT Gibbons' Cincinnati offices. If only one qualified bid arrives, the auction is canceled and that bid becomes the winning bid.
• At least one business day before the auction, Rock Creek will send all qualified bidders the baseline bid, meaning the bid the debtor considers highest or otherwise best. The debtor decides the order in which assets are auctioned.
  • Bidding starts from the baseline bid and runs in rounds, and the debtor announces the leading bid after each round.
  • A round ends once every qualified bidder has had a chance to bid knowing the leading bid.
  • The auction does not close until every qualified bidder has had a reasonable opportunity to overbid.
• Bidding is open and transcribed. Only the debtor, qualified bidders and their advisors may attend, and only qualified bidders may bid. Counterparties to assigned contracts may attend if they notify debtor's counsel by Nov. 30, 2026, at 6 p.m.
• The debtor may require any bidder to provide more evidence that it can close. At the debtor's request, each bidder must confirm in writing that it has not engaged in the kind of collusion described in section 363(n) and that its bid is a good faith, bona fide offer. The debtor may adopt additional auction rules, including adjournments, if they are consistent with the order and disclosed to bidders.
• When evaluating bids, the debtor may weigh:
  • the amount and nature of the consideration, including the valuation of any non-cash consideration, assumed liabilities and payment of cure costs;
  • which contracts must be assumed, and the cost of any related litigation;
  • changes to the purchase agreement, and any delay or cost they cause;
  • regulatory approvals and the likelihood and timing of closing;
  • the net benefit to the estate, including tax implications; and
  • whether a bid for all the assets is better than separate bids for parts of them, or the reverse.
• All of these factors are judged solely by a bid's value to, and effect on, the debtor's estate. Until the court approves a bid, the debtor may reject any bid it considers inadequate, nonconforming or against the estate's best interests.

Successful and Back-Up Bids

• Before the auction ends, the debtor will name the winning bid or bids and, if it chooses, a back-up bid. It will tell participants who won, the amount and material terms of the winning bid, and who the back-up bidder is. It will file a notice of the winning bid before the sale hearing.
• A bid is accepted only when the court approves it at the sale hearing, where the debtor will seek approval of the winning bid and, at its election, the back-up bid. The winning bidder and the debtor must sign all closing documents by the outside closing deadline.
• If, after court approval, the winning bidder fails to close, the back-up bid becomes the winning bid and the debtor may close with the back-up bidder without a further court order. This applies whether the failure is caused by a condition outside either party's control or by the winner's breach, and in either case the debtor must file a notice. If the back-up bidder also fails to close on the same grounds, the debtor may reopen the auction to pick a new winning bid and back-up bid.
• On the seller side, the debtor may pursue all available remedies against a defaulting winning or back-up bidder, subject to its purchase agreement, and may keep that bidder's deposit as part of its damages. On the buyer side, the proposed sale order lifts the automatic stay so the buyer can send notices and take any action its purchase agreement allows, including terminating it. Neither party has to close until all conditions in the purchase agreement are met or waived.

Assumption and Assignment

• By Oct. 23, 2026, the debtor will file a cure schedule listing each potential assigned contract, its counterparty and the proposed cure cost. The schedule will be served by email (where available) and first-class mail by the next business day. Being on the schedule does not mean a contract will be assigned, and it does not concede that the contract is executory. The debtor may amend the schedule.
• The winning bidder pays the cure costs. Objections to cure costs or to assumption and assignment are due Nov. 5, 2026, at 6 p.m. A counterparty that does not object is bound by the scheduled cure cost. It is also barred from claiming additional amounts or defaults, from objecting to adequate assurance of future performance, and from raising section 365(c)(1) defenses.
• The Nov. 5 cure objection deadline comes before the Nov. 10 stalking horse deadline, the Nov. 24 bid deadline and the Nov. 30 date by which bidders must provide adequate assurance information to counterparties that ask for it.
• The parties may settle a disputed cure amount before the sale hearing. If they do not, the debtor may either:
  • assume and assign the contract, paying the undisputed portion at closing while the winning bidder escrows enough cash to pay the full disputed amount (or a lower agreed amount); or
  • postpone assumption until the dispute is resolved.
• Once a disputed amount is resolved by a final, non-appealable order, the winning bidder pays it on the later of closing or three business days after that order. Either side may request a hearing on the dispute with 14 days' notice.
• Assumption and assignment take effect only at closing, and contracts are not assumed if the sale does not close. The proposed sale order would make anti-assignment, bankruptcy-default and change-of-control clauses unenforceable. It would also bar rent accelerations, assignment fees and similar charges triggered by the assignment, and would release the estate from liability for breaches after assignment.

Key Dates

• All times are prevailing Eastern Time. The debtor may extend or change any date by filing a notice on the docket, and the court may do so by order.
• Bid procedures hearing (omnibus hearing): Oct. 22, 2026, at 10 a.m.
• Cure schedule filing deadline: Oct. 23, 2026
• Cure objection deadline: Nov. 5, 2026, at 6 p.m.
• Stalking horse designation deadline: Nov. 10, 2026, at 6 p.m.
• Stalking horse objection deadline: 4 p.m. on the third business day after the debtor files its designation notice
• Last day for a hearing on stalking horse objections: Nov. 20, 2026
• Bid deadline: Nov. 24, 2026, at 6 p.m.
• Adequate assurance information due to requesting counterparties: Nov. 30, 2026, at 2 p.m.
• Deadline for counterparties to give notice they will attend the auction: Nov. 30, 2026, at 6 p.m.
• Auction (if needed): Dec. 1, 2026, at 9 a.m.
• Global sale objection deadline: Dec. 7, 2026, at 6 p.m.
• Sale hearing: Dec. 9, 2026, at 10 a.m. (subject to court availability); the debtor may adjourn or reschedule it without notice
• Outside closing deadline: Dec. 17, 2026, at 11:59 p.m.

Proposed Sale Order

• The proposed sale order would transfer the assets free and clear of all interests except the assumed liabilities, with interests attaching to the proceeds in their existing priority. "Interests" is defined broadly to include every liability of the debtor other than the assumed liabilities, and every liability related to the excluded assets. Holders that do not object by the global objection deadline are deemed to consent. Creditors and other third parties would be permanently barred from pursuing interests against the buyer, its related persons or the assets.
• The buyer and its related persons would not be treated as the debtor's successor in any respect. They would bear no successor or vicarious liability under any theory, expressly including antitrust, environmental, successor or transferee liability, labor law, de facto merger, and taxes relating to the assets on or before closing, and all holders of interests against the debtor or the assets would be deemed to have released any successor-liability claims against them, with the buyer's consideration serving as value for that release. Related persons means the buyer's designees, predecessors, successors, assigns, affiliates, shareholders, members, partners, principals, directors, officers and employees. The buyer would be treated as a new employer under unemployment laws and would not be a successor employer under COBRA.
• When the sale is completed, the debtor and its estate would release the buyer and its related persons from all claims tied to negotiating the purchase agreement, the sale, the auction, the transfer of the assets and the assignment of contracts, except obligations the buyer expressly assumes. The order would also shield the buyer side from liability to the estate for negotiating and closing the deal.
• To the extent the purchase agreement provides and the law allows, the buyer could operate under the debtor's licenses, permits, registrations and other government authorizations that are part of the assets. If a license or permit turns out not to be assignable under section 365, the debtor's license stays in place for the buyer's benefit until the buyer obtains its own, which it must apply for promptly after closing. To the extent section 525 provides, no government unit could revoke or suspend a permit or license because of the bankruptcy. The order's injunction also bars anyone from revoking, terminating or refusing to renew any license or government authorization needed to run the assets.
• The buyer would receive section 363(m) good faith purchaser protection: reversing or modifying the order on appeal would not affect the sale unless it is stayed pending appeal before the outside closing deadline.
• The order could not be modified by any Chapter 11 plan, would bind any trustee, including a Chapter 7 trustee, and would remain effective if the case is converted or dismissed. The parties could amend the purchase agreement without court approval unless the change is materially adverse to the estate. The buyer would owe no broker, finder or financial advisor fees arising from the debtor's arrangements.