Hawker Beechcraft filed its preliminary Joint Plan of Reorganization and a related disclosure statement with the bankruptcy court on Saturday. In the document, the company outlines how it plans to resolve its debts to creditors.
The plan also provides a framework of how the company will transfer ownership of the reorganized company to its creditors.
Later in the process, Hawker Beechcraft will update the filing with more detail about its business plan going forward, the company said.
The plan is supported by the company’s largest creditors and by a “substantial majority” of the debtors’ senior credit facility lenders and holders of the senior notes.
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The aim is to reduce the total funded debt from about $2.552 billion.
“Since the restructuring process began, we have been guided by a single goal: to emerge from Chapter 11 in the strongest possible operational and financial position while preserving as many jobs as possible,” the company said in a letter to employees Monday. “That remains our focus. Your continued focus on designing, manufacturing and servicing the best airplanes in the world is critical to achieving that goal.”
The letter was signed by Hawker Beechcraft CEO Steve Miller and Hawker Beechcraft Corp. Chairman Bill Boisture.
The company filed for a pre-arranged Chapter 11 bankruptcy restructuring agreement on May 3. The bankruptcy followed a prolonged downturn in the business jet industry, with the recession hitting not long after Goldman Sachs and Onex Partners bought the company in 2007 from Raytheon Inc.
On Friday, the company issued 60-day layoff notices to 125 Wichita employees. The latest round brings the total number of job cuts at the plant to 906 people in Wichita so far this year.
It also takes employment in Wichita to fewer than 4,100 people.
The company’s incentives from state and local government totaling $45 million is based on keeping 4,000 employed in Wichita over 10 years, although cash payments aren’t reduced unless the work force falls to below 3,600.
The compromise contemplated under the plan is fair and equitable, will maximize value for stakeholders and provide for the best recovery, the document filed with the court said. The plan also aims to provide sufficient liquidity to fund the company’s emergence from Chapter 11 bankruptcy, appropriately capitalize the reorganized company and facilitate the implementation of the business plan.
“The plan provides for a comprehensive restructuring of the (company’s) prepetition obligations, provides for additional liquidity, preserves the going-concern value of the … business and protects the jobs of employees,” the filing said.
Courting potential buyers
For several months leading up to the bankruptcy filing, Hawker Beechcraft and its investment banker, Perella Weinberg Partners, developed a comprehensive list of potential buyers and investors that could buy the company’s assets.
Since May, they have continued to engage in discussions regarding various restructuring transaction structures, it said.
The company believes that “recoveries to the Debtors’ stakeholders will be maximized by the Debtor’s continued operation as a going concern,” the filing said. “The Debtors believe that their businesses and assets have significant value that would not be realized in liquidation, either in whole or in substantial part, and that the value of the Debtors’ estates is considerably greater as a going concern.”
The company has undertaken “significant efforts” before and after the bankruptcy filing to market the business to “incumbent and third party potential plan sponsors or acquirers,” the filing said.
But no decisions on whether to pursue a sale have been made, it said.
They identified and vetted more than 35 potential buyers, ranging from strategic purchasers to potential private equity partners, it said.
Perella then contacted a targeted group of 15 potential buyers based on strategic fit, financial capability and prior strategic dialogues.
It included three domestic and 12 international parties, of which 13 were strategic and two were financial buyers, the filing said.
Hawker Beechcraft provided nondisclosure agreements to 10 of the parties, who had access to diligence materials in a data room. The materials included more than 2,400 documents regarding all aspects of the business and financial condition.
The company held numerous discussions about the information. Five of the potential buyers traveled or sent advisers to Wichita for more detailed meetings with Hawker Beechcraft’s management team and advisers, the filing said
And members of the company’s management team and Perella visited another four potential buyers in their “home countries.”
Hawker Beechcraft received eight bids, and on June 19, Perella asked six bidders to send revised proposals.
“The Debtors are continuing to evaluate potential sale alternatives and may elect to incorporate one or more sale or plan sponsorship transactions into the plan” if they conclude that will maximize the value for creditors and stakeholders, it said.