January 30, 2013
By Jim Moore
Editor's note: this story, orginally posted Jan. 30, has been updated to reflect an announcement made Feb. 1.
A U.S. Bankruptcy Court judge has signed off on the bankruptcy exit plan approved “overwhelmingly” by Hawker Beechcraft creditors, including agreements on related issues including pensions. The company announced that Judge Stuart M. Bernstein gave final approval Feb. 1 following technical changes to the plan Bernstein directed on Jan. 31.
The decision clears the way for the company to emerge from bankruptcy by the end of February as Beechcraft Corp.
The company announced creditor approval of the bankruptcy exit plan Jan. 25, and court documents spell out in voluminous detail the company’s plan to shed “Hawker” from its name, along with the various jet lines, with the emerging Beechcraft Corp. to focus on a future of pistons, turboprops, and military aircraft including reconnaissance, trainers, and light attack offerings.
Saddled with $2.5 billion in debt amid an ongoing economic downturn that continues to soften demand, Hawker Beechcraft filed for bankruptcy in May 2012, and courted a potential buyer from China, a deal that fell apart.
“Today’s ruling marks the final significant step in the restructuring process," said CEO Robert "Steve" Miller in a Feb. 1 news release, issued a year after he was hired by a board seeking to turn the company's fortunes. "Throughout this process, we have been guided by the goal of emerging in a strong operational and financial position, with an enhanced ability to compete well into the future. Our recapitalization and dramatically reduced debt load will allow us to do exactly that.”
The company announced Miller will serve as a senior advisor to the board, while Bill Boisture, the previous Hawker Beechcraft CEO and current chairman, will return to his role as chief executive of the reorganized Beechcraft Corp.
Hawker Beechcraft has secured agreement from two major banks—J.P. Morgan Securities and Credit Suisse Securities (USA)—to provide $600 million in “exit financing” to facilitate the transfer of ownership from hedge fund investors to various creditors, who will effectively exchange Hawker Beechcraft debt for equity.
The company will also maintain a network of maintenance, repair, and overhaul operations. The judge was also scheduled to rule on vaious agreements related to the exit plan, including a royalty deal reached with Pilatus for the military trainer and light attack T-6 that Hawker Beechcraft hopes to sell to the U.S. Air Force for deployment in Afghanistan.
The T-6 was passed over in favor of the Embraer Super Tucano last year, but the bid was scuttled amid allegations of favoritism, and a new completion ordered, the results of which are likely to be known soon. The court approved on Jan. 31 Hawker Beechcraft’s bid to terminate two pension plans, which will be taken over by the Pension Benefit Guaranty Corp., a government agency that will also have an ownership stake in the new company, according to various published reports. PBGC will pay benefits to vested participants, and the company will remain responsible for hourly worker pensions. The company estimates the overall approach will preserve the vested benefits of 100 percent of union pension plan participants, and 99 percent of non-union participants.
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