UPDATE: Thursday, May 3, 2012
We’re continuing to follow the breaking news of Hawker Beechcraft filing for bankruptcy protection today. The planemaker reached a debt restructuring agreement it says will keep it in business.
As horrible as bankruptcy sounds, for Hawker Beechcraft, this chapter 11 filing is probably the best the company can hope for at this time.
The news is so fresh that many hawker employees entering the plant for second shift work hadn’t heard about their company’s voluntary chapter 11 filing. But it’s been in the works likely soon after new CEO Steve Miller came on the job in February. Miller is known as a “turnaround specialist,” and Hawker has been in need of a turnaround.
The maker of business jets, piston and turboprop planes hasn’t been able to gain much altitude since Onex and Goldman Sachs partners teamed up in 2007 to buy the facilities from Raytheon Aircraft.
CEO miller says the restructuring plan is supported by a majority of its lenders and bondholders.
According to a company news release, this will eliminate approximately $2.5 billion in debt and about $125 million of annual cash interest expense. This means it will continue operations without interruptions, which is important to employees and to Wichita. It’s expected to meet commitments to customers, obligations to suppliers and employees during this recapitalization process.
As part of this prearranged restructuring, Hawker Beechcraft obtains $400 million in debtor in possession financing to keep paying employees, suppliers and vendors.
Hawker Beechcraft employee Davis Anglemyer says, "We've got two billion dollars worth of debt that's being released so now we can start putting money back into the company and start building products."
So, once this filing is confirmed by the U.S Bankruptcy Court, equity ownership in Hawker Beechcraft will be transferred to holders of the company’s secured debt. Essentially, lenders are trading debt for ownership in the company.
UPDATE: Thursday, May 3, 2012
A Wichita aviation company has filed chapter 11 bankruptcy in an effort to eliminate debt and restructure.
In a press release Thursday, Hawker Beechcraft said the company reached an agreement
with lenders and senior bondholders. Hawker said filing bankruptcy will strengthen the company for the future and eliminate approximately $2.5 billion in debt and approximately $125 million of annual cash interest expense.
Hawker also obtained a commitment for $400 million in debtor-in-possession financing, enabling the company to continue paying employees, suppliers, vendors and others in the normal course of business.
Robert Miller, Hawker CEO, said the agreement will allow the company to stabilize and improve capital structure.
“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," Miller said.
Hawker said the filing will not affect the company’s normal course of business. Miller said the company will continue its operations without interruption and meet its ongoing commitments to customers during the restructuring process. The company said it expects to meet its obligations to its suppliers and employees during the recapitalization process.
'KAKE Lawyer on the Line' Roger Reidmiller says bankruptcy doesn't spell the end.
"Ultimately, a bankruptcy is not always the death of a particular business. It can be merely a reorganization and a new life for that business," says Reidmiller.
Chapter 11 of the U.S. Bankruptcy Code allows a company to continue operating its business and managing its assets in the ordinary course of business.
Kansas Congressman Mike Pompeo, 4th District, was one of several lawmakers who lobbied to keep the aviation company in Kansas. Hawker received a $45 million incentive package in 2010 from the state and local governments to keep operations in Wichita.
"I am confident that Hawker Beechcraft will come out of this," Pompeo said. "They will move forward in a way where the employees will end up in a good spot and we still have this amazing, historic company right here in the Air Capital."
Aviation reporter Chris Frank is getting reaction from Hawker employees and union members. Watch for his reports tonight on KAKE News.