Hawker Beechcraft Files Bankruptcy

Hawker, bought for $3.3 billion in 2007, listed more than $1 billion in assets and debt in Chapter 11 documents filed in U.S. Bankruptcy Court in Manhattan. The company reported net losses totaling more than $900 million in the past two years as U.S. military contracts and plane sales declined.

“Restructuring our balance sheet and recapitalizing the company in partnership with our debtholders will dramatically improve Hawker Beechcraft’s ability to compete in a rapidly changing environment,” Steve Miller, Hawker’s chief executive officer, said in a statement.

Hawker, based in Wichita, KS, said a financial restructuring plan supported by more than two-thirds of its senior secured lenders and senior bondholders will eliminate about $2.5 billion in debt and about $125 million a year in cash interest expenses.

Under the proposal, “equity ownership in Hawker will be transferred to holders of the company’s secured debt, bond debt and certain other unsecured creditors,” according to the company’s statement.

Loan Commitment
The jetmaker obtained a $400 million loan commitment from a group of senior lenders to fund operations while it seeks court approval of the turnaround plan. Service will remain uninterrupted and all orders will be fulfilled, Hawker said.

Hawker said it may need to seek court approval to terminate its pension plans to exit bankruptcy. The three pension plans are 56%-funded, with $769 million in assets to cover about $1.4 billion in benefits, according to the Pension Benefit Guaranty Corp.

The PBGC said it would cover $533 million of the $611 million shortfall and will work with Hawker to keep the plans alive.

“We are committed to working with Hawker Beechcraft and its creditors so that the company can reorganize successfully, while also maintaining the retirement security of its nearly 20,000 workers and retirees,” J. Jioni Palmer, an agency spokesman, said in a statement on its website.

March Loan
The company announced a $120 million loan in March to use while it negotiated with creditors to avoid a default. Lenders holding about 70% of Hawker’s bank debt also agreed to waive certain covenants and accept a delay in interest payments until June 29, the company said in a statement that month.

Hawker and its affiliates collectively owe its 50 largest unsecured creditors at least $914.9 million, court papers show. The PBGC is listed as the first unsecured creditor, owed an undisclosed amount. Deutsche Bank National Trust Co., as the administrative agent for three separate series of unsecured notes, is owed a total of about $663.6 million.

Hawker’s annual report, filed April 13 with the Securities and Exchange Commission, “reflects the combined effect of the prolonged weakness in our market that has continued to affect our business and the heavy debt burden the company has operated under since 2007,” Miller said in a statement that day. Hawker filed the report after the March 30 deadline to continue negotiations with lenders.