Hawker Beechcraft looks to reject IT agreement, acquire related assets

By Caroline Salls

Pittsburgh, Oct. 22 - Hawker Beechcraft, Inc. requested court approval of a claims settlement, asset purchase and contract rejection agreement with Computer Sciences Corp., according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Hawker Beechcraft said it entered into an information technology services agreement with Computer Sciences in April 2008 under which Computer Sciences agreed to provide network and telecommunication management, software, hardware, internet maintenance and server and database support services.

The IT agreement also allowed Hawker Beechcraft to use specified assets through an asset recovery program. Under that program, Hawker Beechcraft could acquire IT assets at an annualized 13% interest rate over a five-year period.

According to the motion, Hawker Beechcraft discovered that significant cost savings could be achieved by rejecting the IT agreement. The company said the savings would be achieved through outsourcing some services to alternative vendors and hiring some Computer Sciences employees, as permitted under the IT agreement.

In addition, Hawker Beechcraft said it can achieve significant cost savings through the outright purchase of assets from Computer Sciences and the return of other assets to Computer Sciences that are no longer necessary or will be replaced by the new vendors.

Hawker Beechcraft said it was concerned that a total rejection of the IT agreement would require it to replace nearly their entire IT infrastructure on a compressed timeline.

As a result, the company said it decided to negotiate a comprehensive solution with Computer Sciences that would result in rejection of the costly IT agreement and acquisition of the necessary assets at a reduced price.

Agreement terms

Under the proposed agreement:

• Computer Sciences will have a $5.25 million general unsecured claim in full satisfaction of any pre-bankruptcy claims it holds against the Hawker Beechcraft debts;

• The debtors will continue to pay all post-bankruptcy fees due under the IT agreement through the rejection date;

• Computer Sciences will have a $4.6 million rejection damages claim, which will be treated as a general unsecured claim;

• Hawker Beechcraft will acquire specified IT assets for $3.5 million;

• Hawker Beechcraft will pay charges associated with the acquired assets through Dec. 31;

• Hawker Beechcraft will return specified assets to Computer Sciences;

• Computer Sciences will provide its existing staff personnel and continue to perform in accordance with the IT agreement through the Oct. 31 rejection date. Hawker Beechcraft will pay charges for the services through he rejection date; and

• Hawker Beechcraft and its subcontractors will have the right to hire Computer Sciences personnel.

A hearing is scheduled for Oct. 30.

Hawker Beechcraft is a Wichita, Kan.-based manufacturer of business, special mission, light attack and trainer aircraft. The company filed for bankruptcy on May 3. Its Chapter 11 case number is 12-11873.

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