Hawker Beechcraft, Inc. today announced a financial restructure that will see it apply for Chapter 11 bankruptcy protection and, if successful, transfer equity in the company to certain creditors.
The agreement made with a number of senior secured lenders and senior bondholders on the terms of a financial restructuring plan is expected to strengthen the company for the future and eliminate approximately US$2.5 billion in debt and approximately US$125 million of annual cash interest expense. To expedite the arrangement, Hawker Beechcraft and certain subsidiaries filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court . The terms of the agreement will take effect when the company’s reorganization plan is confirmed by the Court and the Chapter 11 case is concluded.
Chapter 11 of the US Bankruptcy Code allows a company to continue operating in the ordinary course of business. The aim of Chapter 11 to encourage and enable a company to continue to operate while restructuring its business, thereby preserving jobs and maximizing the recovery for all stakeholders.
As part of the deal with creditors, Hawker Beechcraft obtained a commitment for $400 million in Debtor-in-Possession (DIP) financing, which will enable it to continue paying employees, suppliers and vendors and conduct business as usual. The company believes it will be able to fulfill all orders and service commitments without interruption.
Robert S. (Steve) Miller, CEO of Hawker Beechcraft, Inc., said, “We are pleased to have reached an agreement with our largest lenders and bondholders on a solution to stabilize and improve our capital structure. In the last three years, the company has made aggressive transformational changes in all operational functions, and today’s announcement represents the next step forward. Restructuring our balance sheet and recapitalizing the company in partnership with our debtholders will dramatically improve Hawker Beechcraft’s ability to compete in a rapidly changing environment.
“As we have worked to develop this long-term plan to recapitalize the company and strongly position Hawker Beechcraft for the future, our employees have continued to build the best airplanes in the world and provide our owners with the most comprehensive global customer support in the industry. The protections provided by the US Bankruptcy Code and the financing commitment we have obtained put Hawker Beechcraft in a great position to continue to do so throughout the restructuring process.”
More about Hawker Beechcraft's precarious position here.