The face of Hawker Beechcraft will be changed by the prearranged reorganization bankruptcy the planemaker filed Thursday, according to a Wichita bankruptcy attorney.
The company’s core mission – building airplanes – won’t change.
Veteran bankruptcy counsel Bill Zimmerman said the prearranged bankruptcy sale likely means that at least a part of the company will be under new ownership.
“What prearranged means is they’ve already negotiated with a group of potential purchasers and lenders, and they essentially have arranged a sale of the business with current creditor approval to deal with the outstanding debt,” Zimmerman said. “There’s probably going to be a sale to a new buyer.”
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This type of bankruptcy is designed to get Beechcraft back to the business of building airplanes with a good balance sheet as soon as possible, Zimmerman said.
What’s less clear is what will happen to the company’s creditors – and the impact on the city of Wichita and the state of Kansas, which provided financial incentives to keep Hawker Beechcraft in Wichita.
Secured creditors are in good shape, Zimmerman said. The company’s vendors are a different story, as are Wichita and Kansas taxpayers and company pensioners.
“The secured credits, the creditors secured by tangible hard assets, are usually in a pretty good position,” Zimmerman said. “They may have to take a discount, agree to let the debt go for a certain amount, but that’s something that’s agreed to.”
The company’s vendors – with the notable exception of parts-makers – are in more jeopardy, Zimmerman said. And city, county and state governments could be, too, without defined claw-back provisions in their subsidies contracts with Hawker Beechcraft.
“It’s a good question on the vendors, because there’s no guarantee they’ll be paid in full,” Zimmerman said. “They’ll probably get something, but there’s a haircut coming for them and they’ve got zero leverage.”
The parts-makers are the ones with leverage in the bankruptcy, Zimmerman said.
“I mean, you can’t run out to Walmart and buy those parts off the shelf, and you can’t make them in-house for the tooling issues and such,” he said. “It’s an unusual situation, and they have more leverage than somebody who was just supplying janitorial supplies to the business.”
As for the $45 million in financial incentives the city, county and state gave Hawker to remain in Wichita, the fate of that money likely depends on the strength of the contracts written with Hawker, Zimmerman said.
The fate of the company’s pension plan is harder to call, Zimmerman said.
“They’ve certainly by now negotiated with the pension plans, good-faith negotiations, as the law requires before they do anything to amend, change or alter the pension agreements,” he said. “What people should understand is that after the bankruptcy, change is certainly in the pension’s future. It’s something a pensioner should have their eye upon.”