As of mid-June the next hurdle for Hawker Beechcraft was the June 30 deadline to file its plan of reorganization with the U.S. Bankruptcy Court in Manhattan.
“The plan provides specific details regarding how the company plans to pay creditors and allow the business to be successful in the long term,” said an HBC spokeswoman.
In addition to the restructuring process, which the company expects will allow it to emerge from Chapter 11 bankruptcy by the end of this year, attorney Patrick Nash, Jr. of Kirkland & Ellis confirmed before the court in May that several companies have expressed some interest in acquiring at least portions of HBC.
As of June 11, parties interested in bidding on the Wichita OEM, in part or in whole, had submitted documentation of their bids but they were not made public.
Textron, parent company of Wichita aircraft manufacturer Cessna, is among the names of potential buyers circulating around the industry. In April this year, during a first-quarter financial results conference call, Textron chairman and CEO Scott Donnelly acknowledged, “There are certainly some assets there [at Hawker Beechcraft] that we think would be very interesting.”
Brazilian competitor Embraer is also reportedly interested, though as of mid-June there was no confirmation that either Textron or Embraer had submitted a bid.
Options and Assumptions for Reorganization
In a presentation to the court earlier this year, HBC offered an executive summary of its reorganized business plan framework. The summary called for HBC to revisit the organization from the bottom up, with cash flow, brand issues and execution risks key considerations. It also called for a fresh look at the forecast period from 2013 to 2016.
The summary listed several options and assumptions available during reorganization:
• Option A: The company exits production of all jets production but continues the Beechcraft business, including Hawker Beechcraft Defense Company.
• Option B: In addition to Beechcraft, the company continues to produce the Hawker 900.
• Option C: In addition to Beechcraft, the company would continue to produce the Hawker 900 and Hawker 4000.
Included in the first two of those assumptions was that the company would stop supporting the Hawker 4000 and Premier installed base, cease engineering support and transfer warranty support to a “residual” buyer.
Paying Off Vendors and Suppliers
At EBACE in May, HBC senior vice president Shawn Vick discussed the tender subject of debt, saying “our debt-holders are exchanging their debt for equity, meaning ownership, in Hawker Beechcraft. They have also agreed to provide $400 million to finance the company’s continued operations during the restructuring period.”
In the Chapter 11 filing, HBC said it owed more than $225 million to approximately 1,500 vendors and suppliers, and was asking the court permission to pay up to $81 million–about 35 percent of the amount owed–to vendors and suppliers deemed essential to maintaining production.
Most recently, Hawker Beechcraft has been “working together with the ad hoc committee of senior secured lenders and the ad hoc consortium of minority first lenders regarding the plan of reorganization.”
In mid-June the court granted HBC permission to pay the four groups of what it describes as “essential” vendors (those who shipped materials within 20 days of the date Chapter 11 was filed); shippers and warehousemen who need to obtain delivery and release of goods, raw materials, parts, components, materials, equipment and other items; and to third parties who could put liens on property, such as money for customs duties and related fees.
The HBC spokeswoman said the company has more than 1,500 vendors and has been working through the process of payment, vendor by vendor. And she added, “To the extent any vendors take any actions that violate HBC’s rights under the bankruptcy code, HBC will exercise all rights that it has available to it.” This would include seeking assistance of the court to compel performance by any vendor.