Hawker chairman opens up about bankruptcy
07/13/2014 1:35 PM
08/08/2014 10:13 AM
Correction: Bill Boisture is Hawker Beechcraft Corporation chairman. His title was incorrect in a previous version of this story.
Working through a bankruptcy the size of Hawker Beechcraft’s is a difficult and complex process, corporation chairman Bill Boisture said Wednesday in a sit-down interview at the National Business Aviation Association’s annual convention.
He said the bankruptcy process balances many interests among the many constituencies.
“Those interests aren’t necessarily aligned,” Boisture said from an office inside the company’s static display at the Orlando Executive Airport. “There are large amounts of money being lost as a result of this bankruptcy.”
Hawker Beechcraft filed for Chapter 11 bankruptcy in May, looking to shed $2.5 billion in debt. A deal to sell the business to Superior Aircraft Beijing fell through in October, so the company announced it would shed its jet business and remake the company as Beechcraft Corp., focusing on its Baron, Bonanza, King Air and military products.
The company that emerges from bankruptcy early next year, Boisture said, will be funded by four secured lenders who will own 81 percent of the new company. He declined to name the lenders, saying they preferred not to be identified.
“These are financial entities that are familiar with the company,” Boisture said. “They were part of the prearranged filing, which means they understood the company coming into the bankruptcy.”
The level of funding the new company will exit with has not yet been determined, he said. Company officials have said they hope to emerge from bankruptcy within the first quarter of 2013, and perhaps as early as the end of January.
Whether the new owners would want to turn around and then eventually sell Beechcraft Corp. – which employs about 4,100 people in Wichita – would be up to them, Boisture said.
“The plan envisions the company will be privately owned by secured lenders and be operated as a stand-alone company,” Boisture said. “And to speculate beyond that at this point requires that one speculate about the health of the world economy and the world aircraft market and a block of other things.”
With the failed deal with Superior behind it, Hawker Beechcraft contacted the other parties that had expressed interest in the company to talk about the jet business, Boisture said earlier in the week. It’s talking to others that have since come forward.
During the interview Wednesday, Boisture also talked about supplier agreements and jet warranties.
During the bankruptcy, the company can legally continue agreements currently in place with its more than 1,000 suppliers or reject them and renegotiate new ones going forward. The company has elected to renegotiate, Boisture said.
“We’re in the process of doing those kinds of things right now,” he said.
The company also has asked the court to allow it to reject warranty and Support Plus programs to owners of Hawker 4000 and Premier 1A jets. Maintaining those programs “was too much risk” to the new company, Boisture said.
“In order to make the go-forward company strong and have an acceptable level of risk, we elected to reject those contracts and warranties,” he said.
Support Plus was a program in which owners paid a set monthly fee for maintenance and parts. They typically were under a five-year contract.
“We want to pass the obligation for the 4000 and Premier support to another party,” Boisture said. “We do not want that obligation.”
By selling the planes’ type certificates, a new buyer can set up a business to support the airplanes, he said. The owner of the type certificates would then be obligated for their continuous air-worthiness, Boisture said.
Hawker Beechcraft is also asking the court to reject its obligation to complete an upgrade and enhancement program on the Hawker 4000. It would be up to a buyer whether to go forward with the upgrades.
“They’re not obligated to do it, although there are portions of it that may come under ‘continuous airworthiness,’ ” he said.
Hawker Beechcraft will retain its network of service centers. Owners of Hawker 4000 and Premier jets can continue to buy parts and receive service and maintenance from the company’s global support business.
“We’re set up to support the aircraft,” Boisture said.
The company filed an amended reorganization plan with the bankruptcy court Monday. It’s up to the judge whether to accept it.