Reuters news service is reporting that sources say that Hawker Beechcraft is preparing to file for bankruptcy protection in the next several weeks.
Hawker Beechcraft is negotiating a pre-arranged bankruptcy with its largest lenders, which includes Centerbridge Partners, Angelo Gordon and Capital Research & Management, the Reuters report said, quoting people familiar with the matter.
The Wichita aircraft manufacturer was bought in 2007 by Goldman Sachs’ private equity arm and Onex Corp. for $3.3 billion from Raytheon Inc.
It would be surprising if Hawker Beechcraft did not file for bankruptcy, one analyst told The Eagle. The analyst did not want his name used because he is not authorized by his company to talk to the media.
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“I would definitely assume that they’re filing,” the analyst said.
Centerbridge is the company’s biggest lender and holds as much as half of its term loans, the Reuters report said.
The lenders would likely provide debtor-in-possession financing that would allow the company to continue to operate, it said. One source told Reuters that the financing is expected to be less than $500 million. But that number could change.
On Tuesday, Hawker Beechcraft announced that it had reached an agreement with certain lenders that will provide about $120 million of additional liquidity.
The company plans to use the loan to fund ongoing operations as the company works with lenders towards a comprehensive recapitalization, it said Tuesday.
Hawker Beechcraft CEO Steve Miller said in a statement Tuesday that the company is struggling with a debt load that restricts the company’s ability to succeed and execute on its strategy.
“We believe this agreement will stabilize the company’s current financial position,” the statement said.
It gives the company and its lenders more time and flexibility to work together to recapitalize the company and better its position for the future.
“We believe this loan demonstrates confidence of long-term value of the company,” Miller said in the statement.
The forbearance agreement is scheduled to expire June 29.
Analysts are watching whether Hawker Beechcraft will pay the April 1 interest, or coupon, on its bond issues. That interest payment will total $28.3 million.
The bonds are trading for pennies on the dollar. Analysts say the market is signaling that it expects the company to take some kind of action.
If the company is going to file for bankruptcy protection in the relatively near term, it won’t pay the interest payment, one analyst said. Instead, it would keep the money to use in the bankruptcy.
In February, Hawker Beechcraft’s board of directors brought in turnaround expert Miller to head the company. Miller is known for his ability to work with financially troubled companies and solve hard problems.
He helped oversee the bankruptcy of Delphi Corp. and Federal-Mogul Corp., and helped in Chrysler Corp.’s return to profitability.
Hawker Beechcraft also brought in financial adviser Perella Weinberg and legal firm Kirkland & Ellis.
A Debtwire report this month quoted unnamed sources saying the company also has brought on turnaround and restructuring firm Alvarez & Marshal. The company can bring expertise in financial or operational issues, analysts said.
Hawker Beechcraft has said it plans to release its 2011 fourth-quarter and year-end financial report this week. This is the last week the company can legally report.