Hawker Beechcraft Inc., on the heels of a deal that will exchange approximately $2 billion of its debt for control of the company once its reorganization is complete, filed for Chapter 11 as reported by Fox Business and Yahoo News.
The Aircraft manufacturer, Hawker Beechcraft, joined 17 affiliates in the filing on May 3 made in New York's U.S. Bankruptcy Court. The company is based in Wichita, Kan.
A prearranged structuring plan, eradicating nearly $2.5 billion in debt, was made with investment firms Centerbridge Partners, Angelo, Gordon & Co., Sankaty Advisors LLC and Capital Research and Management. The firms own $1.8 billion of senior debt. The exchange will allow them to acquire the company's new equity.
The plan also removes $125 million in annual cash interest.
Robert S. "Steve" Miller, a restructuring expert, was obtained by Hawker in February. Miller also worked with Delphi Automotive and took charge as their chief executive. Of Hawker filing Miller said, "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."
To blame for the bankruptcy was the buyout by Goldman Sachs, the declining amount of business in the corporate-jet market and the lessening demand for aircraft deliveries.
Hawker's largest unsecured creditors are the Pension Benefit Guaranty Corp. (PBGC) and Deutsche Bank AG (DB).
PBGC said that of Hawker's three pension plans, 56% are funded – and that there is $769 million in assets to cover the $1.4 billion in benefits. PBGC also said that if Hawker were to cease the pension plans they would be responsible of $533 million out of the $611 million deficit.
PBGC plans to keep its commitment to help Hawker with the restructure, and not see any end to the pension plans. J. Jioni Palmer, the director of PBGC's communications, said, "Our top priority is to work with companies so they can keep their pensions going."
Hawker has approximately 7,400 employees – about 4,700 in the Wichita facility alone – and plans no layoffs during the filing as they have retained a $400 million bankruptcy loan from the senior lenders. The loan will also help them continue to meet the needs of their customers and pay their vendors.
Other factories are located in Little Rock, Ark., Britain and Mexico. There are more than 100 service centers globally.
The company started in 1994, originally known as the Raytheon Aircraft Company. It was a combination of Raytheon, Beech Aircraft and Raytheon Corporate Jets.
Gov. Sam Brownback said, "Hawker Beechcraft has a long and significant history in Wichita and is a critical part of our state's aerospace cluster. Preserving jobs in Wichita and safeguarding the state's investment are our priorities. We will be working closely with the company's leaders during this restructuring process."
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