Hawker Beechcraft will ask the court in a hearing next week to approve its plan to exit Chapter 11 bankruptcy and shed $2.5 billion in debt off its books.
On Friday, the company said that its key creditors had voted overwhelmingly to approve its plan for reorganization.
Hawker Beechcraft declared Chapter 11 bankruptcy May 3.
The creditors, voting in a solicitation process that is part of the bankruptcy, “have overwhelmingly approved its proposed Joint Plan of Reorganization,” Hawker Beechcraft said in a news release.
The company plans to emerge as a smaller, reorganized company called Beechcraft Corp., focusing on its Baron, Bonanza and King Air products and its military and after-market business.
It’s been widely reported that its new owners will be a group of hedge funds.
Hawker Beechcraft has not confirmed that or the names of the owners.
But according to Dow Jones, the funds include Bain Capital’s Sankaty Advisors, Angelo Gordon & Co., and Centerbridge Partners, which would swap more than $920 million in debt for an 81.1 percent stake in the company.
Senior bondholders, unsecured creditors and the government’s pension insurer, the Pension Benefit Guaranty Corp., would share in the remaining 18.9 percent stake, Dow Jones said.
Hawker Beechcraft also announced Friday that J.P. Morgan Securities and Credit Suisse Securities (USA) have agreed to act as joint lead arrangers and joint book runners to structure, arrange and syndicate $600 million in exit financing, consisting of a term loan and a revolving line of credit.
The news release said affiliated banks of the joint lead arrangers, JPMorgan Chase Bank, N.A. and Credit Suisse AG, have committed to underwrite the financing. The financing will be used to repay all claims under the debtor-in-possession post-petition credit facility, pay certain settlement and cure payments and fund ongoing operations. The financing is subject to, among other things, completion of definitive financing documentation and court approval.
In a statement, Steve Miller, CEO of Hawker Beechcraft, Inc., said, “The tremendous show of support of our creditors for the Plan, which will dramatically reduce Hawker Beechcraft’s debt load, and the financing commitment from JPMorgan and Credit Suisse mark an important milestone for the company as it moves closer to emerging from the restructuring process.”
Hawker Beechcraft will seek court approval of the plan at the confirmation hearing set for Thursday. The judge is also expected to rule on Hawker Beechcraft’s three pension plans then.
The company has asked the court to terminate two of its retirement plans – a salaried plan and a base retirement plan – and for the PBGC to take over and pay benefits to the vested participants.
The judge will also rule on whether to continue a benefit plan for hourly workers in an agreement reached with the Machinists union last year.
Under the agreement, accruals would be frozen at the end of 2012 and a new Retirement Income Savings plan created.
The judge is also expected to rule on a proposed settlement with an ad hoc committee of retirees to cover losses they would incur as a result of the reorganization.
Hawker Beechcraft expects to emerge from Chapter 11 in the second half of February.
A new board of directors, to be appointed by the new owners of the company, will take over on the date of emergence.