Bankruptcy judge close to granting Beechcraft plan
01/31/2013 3:28 PM
08/08/2014 10:14 AM
A New York bankruptcy judge made clear Thursday that he’s close to signing off on a reorganization plan for Hawker Beechcraft that will preserve thousands of jobs.
Judge Stuart Bernstein heard no major objections from creditors while reviewing a draft of the plan during a lengthy hearing at a federal bankruptcy court in Manhattan. He said he wanted minor changes in the wording before granting final approval.
“Assuming I don’t have a problem with it, I’ll approve it,” Bernstein said.
Lawyers for the Wichita-based planemaker said it expects to emerge from Chapter 11 in the second half of February.
The judge also signed off on a provision to cut costs by having the Pension Benefit Guarantee Corp. take over two Hawker Beechcraft retirement plans. Also approved was a request by the company to continue the pension plan for hourly workers under an agreement reached with the Machinists union that freezes pensions and creates a new retirement savings plan.
The labor provisions will allow the company to continue to employ “thousands of union and non-union workers,” the judge said.
As of Dec. 31, Hawker Beechcraft employed 5,400 people companywide, including more than 3,300 at its Wichita headquarters. It remains unclear if that total will change as it emerges from bankruptcy.
Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, said that given the financial turmoil, it was “remarkable” that the 3,000 current and laid-off workers represented by the union will still have retirement benefits.
“It is a credit to both sides of the bargaining table that workers’ interests at Hawker were given the respect they deserve,” he said in a statement.
The company has secured an underwriting commitment for $600 million in exit financing consisting of a term loan and revolving line of credit from JPMorgan Chase Bank and Credit Suisse.
The slimmed-down company, which plans to rename itself Beechcraft Corp., will focus on more profitable turboprop, piston, special mission and military aircraft, as well as its parts, maintenance, repairs and refurbishment business. It plans to shed its struggling business jet operations.
Under the reorganization plan, secured bank debt incurred before the bankruptcy as well as unsecured bond debt and certain general unsecured claims will be cancelled with those creditors receiving equity in the reorganized company. A board appointed by the new owners will take over once the company emerges from bankruptcy protection.
Hawker Beechcraft, owned by Onex Partners and GS Capital Partners, filed for bankruptcy protection in May. It has struggled with the sluggish business jet market more than other plane makers. It was purchased in 2007 in a highly leveraged deal just before the general aviation market tanked.
The complex bankruptcy proceedings have involved 18 entities and $2.4 billion in debt. In addition to its Wichita headquarters, the company has factories in Little Rock, Ark.; the United Kingdom; and Mexico, as well as more than 100 service centers worldwide.
Hawker Beechcraft traces its Kansas roots to Beech Aircraft Corp., a company founded by Walter and Olive Ann Beech that began making aircraft in the 1930s.
The judge set another court date for April 9, describing it as a “post-confirmation” status conference.
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