Barely two weeks after filing for U.S. Chapter 11 bankruptcy protection, Hawker Beechcraft Corporation (Stand 7060) told a pre-EBACE press conference on May 13 that it will be “well positioned for the future” when it emerges from that status later this year.
“There’s been a lot of misinformation and speculation. We’re going to talk to you about facts,” said Shawn Vick, executive vice president of customers. “Chapter 11 protection should not be confused with liquidation or insolvency. There is simply too much value in Hawker Beechcraft, its people, products and brands to allow that to happen.”
Since investment firms Goldman Sachs and Onex Partners purchased Hawker Beechcraft in 2007 in a leveraged buyout, the company has struggled under the $2.5 billion in debt the deal created and the $125 million annual interest payments required to service it. Vick pointed out that, at the time, annual business jet sales amounted to some 1,600 units, with projections of 15 percent yearly growth. The reality was that the company had to face a 65-percent decline in sales in the wake of the financial crisis of 2008.
As word of the company’s financial woes spread over the last three to four months, some suppliers began cutting back or stopping deliveries, halting some production lines. “Someone asked how many parts it takes to build an airplane.” Vick said, before providing the answer: “All of them.”
Under the terms of the Chapter 11 reorganization, creditors will exchange their debt for ownership of the company, and have also extended $400 million to finance ongoing operations while the restructuring is concluded. Goldman Sachs and Onex, which each own 49 percent of Hawker Beechcraft, will retain small positions in the company.
“Investors who know Hawker Beechcraft best trade debt for equity, but lend even more,” Vick claimed. “That’s confidence in the long-term value of Hawker Beechcraft. Now that we have entered Chapter 11, a well-defined and structured process, we’re well positioned for the future.”
Bolstering that contention, Vick said company has undergone “a transformation over the past three years,” including making investments in lean manufacturing, employee training, and in reaching labor agreements with its workforce. The company expects to emerge from Chapter 11 by the end of 2012. No changes to the product line are planned, and no firings will result from the restructuring.
Meanwhile, the Hawker 400XPR and 800XPR upgrade programs are on schedule, and the company is preparing to bid again on the U.S. Air Force contract for a light-air-support aircraft with its AT-6, following the Air Force’s cancellation of its contract with Sierra Nevada for 20 Super Tucanos made by Brazil’s Embraer.
Underscoring Hawker Beechcraft’s commitment to the future, the company has its full product line on static display in addition to its highly visible display stand presence.
“We’re very optimistic about the future of Hawker Beechcraft,” said Vick. “We’re here at EBACE to sell aircraft and services.”