May 31, 2012

Hawker Beechcraft exploring sale, lawyer tells bankruptcy court

A lawyer for financially troubled Hawker Beechcraft told the U.S. Bankruptcy Court in Manhattan that along with its restructuring, Hawker Beechcraft is exploring a sale of the company.

A lawyer for financially troubled Hawker Beechcraft told the U.S. Bankruptcy Court in Manhattan that along with its restructuring, Hawker Beechcraft is exploring a sale of the company.

Interested parties have been asked to submit documentation on their bids by June 7, the Dow Jones Daily Bankruptcy Review said in a report.

“There has been a fair amount of activity,” Kirkland & Ellis lawyer Patrick Nash Jr. told the court, the report said. “Depending on what we get, this case could become even more interesting.”

The planemaker filed for Chapter 11 bankruptcy protection May 3. The company has been hurt by a prolonged downturn in the business jet industry and from its heavy debt load taken on in 2007 when Goldman Sachs and Onex Partners bought the company from Raytheon Co.

Hawker Beechcraft plans to file specifics of its restructuring plan with the court by the end of June, the report said.

“We intend to emerge from Chapter 11 as an independent company,” said Hawker Beechcraft spokeswoman Nicole Alexander. “But as is the case with every other company, we must constantly evaluate all of our options in order to be positioned for the future.”

The company hopes to leave bankruptcy protection by the end of the year, Alexander said.

In an interview with Corporate Jet Investor, Shawn Vick, a Hawker Beechcraft executive vice president, cautioned against reading too much into the divestiture options included in the bankruptcy filing.

“Too much has been made of those options in the filing,” Vick said. “It was a modeling exercise outlining potential alternatives. It was just to provide a view of the variety of options that could be available and should not be taken out of context.”

He said that filing Chapter 11 protection and addressing the debt issue was the right thing to do.

In December, it became clear the debt was becoming unsustainable, especially balloon payments due in 2013, Vick told Corporate Jet Investor.

“We are very simply taking the steps that are necessary for us to emerge out of bankruptcy protection and as a strong, profitable company,” he said.

Court approvals

On Wednesday, Judge Stuart Bernstein said that Hawker Beechcraft could continue borrowing on a $400 million loan made by four senior lenders.

And he approved modifications to the documentation of the $400 million loan that extends the time the company’s list of unsecured creditors and the Pension Benefit Guaranty Corp. can investigate the 2007 leveraged buyout of the company – from July 21 to Aug. 10.

The PBGC and the unsecured creditors have said that the wording in the debtor-in-possession loan documentation didn’t give them enough time to determine whether certain liens on assets granted to Hawker’s lenders as part of the leveraged buyout can be challenged under the bankruptcy law, the Dow Jones report said.

The PBGC insures the pensions of Hawker Beechcraft employees. The pension is currently underfunded by $493 million, according to court documents.

Hawker Beechcraft hasn’t begun to negotiate a settlement with PBGC, Nash told the court, the report said.

Bernstein also approved other “second-day” motions, including the right to keep paying employees and bankruptcy professionals working on the case and to continue to retain Perella Weinberg Partners as an investment banker and financial adviser.

In an “engagement letter” with Perella quoted in court documents, Hawker Beechcraft has agreed to pay Perella $10 million in a restructuring fee or, in the case a sale is finalized and the value is greater than $1 billion, $10 million or 0.65 percent of the transaction value, whichever is greater. If a transaction value is less than $1 billion, the fee would be 1 percent of the transaction value, according to court documents.

The company is not entitled to both a restructuring fee and a sale fee.

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