Hawker Beechcraft Chapter 11 plan confirmed; February exit expected

By Caroline Salls

Pittsburgh, Feb. 1 - Hawker Beechcraft, Inc.'s plan of reorganization has been confirmed by the U.S. Bankruptcy Court for the Southern District of New York, paving the way for the company to emerge from Chapter 11 in the second half of February, according to a company news release.

"Today's ruling marks the final significant step in the restructuring process," chief executive officer Robert S. "Steve" Miller said in the release.

"Throughout this process, we have been guided by the goal of emerging in a strong operational and financial position, with an enhanced ability to compete well into the future. Our recapitalization and dramatically reduced debt load will allow us to do exactly that."

As part of its reorganization, the company intends to rename itself Beechcraft Corp. and implement a business plan that focuses on its turboprop, piston, special mission and trainer/attack aircraft and on its parts, maintenance, repairs and refurbishment businesses.

Plan terms

Upon emergence, pre-bankruptcy secured bank debt, unsecured bond debt and some general unsecured claims will be canceled and holders will receive equity in the reorganized company in percentages negotiated by the major creditor groups at the time Hawker Beechcraft filed bankruptcy.

To preserve the debtors' corporate structure, intercompany claims may be reinstated or, at the reorganized debtors' option, be cancelled or compromised, and no distribution will be made on account of those intercompany claims.

To the extent not otherwise transferred by Hawker Beechcraft or the reorganized company, intercompany interests will be reinstated.

All Hawker Beechcraft interests will be extinguished under the plan and holders will receive no distribution.

New board

Effective upon emergence, the company's new board of directors will include Donald G. "Don" Cook, Gene Davis, Ralph Heath, David Tolley, Gideon Argov, Robert (Bob) Johnson and Bill Boisture. The company said it expects to name two additional directors before the plan effective date.

In addition, Boisture will become CEO of Beechcraft Corp. and Steve Miller will become senior adviser to the board.

Exit financing

As previously reported, the court approved the company's motion to hire J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC to act as joint lead arrangers and joint bookrunners to structure, arrange and syndicate $600 million in exit financing, consisting of a term loan and a revolving line of credit.

Hawker Beechcraft said the affiliated banks of the joint lead arrangers, JPMorgan Chase Bank, NA and Credit Suisse AG, have committed to underwrite the financing, which will be used to repay all claims under the debtor-in-possession post-petition credit facility, pay specified settlement and cure payments and fund ongoing operations.

Pension deal approved

On Jan. 31, the court also approved the company's agreement with the Pension Benefit Guaranty Corp. and the International Association of Machinists to address its pension plans within the context of its restructuring efforts.

According to the terms of the agreement, accrued retirement benefits for participants in the company's hourly/union plan will still be the responsibility of Hawker Beechcraft, while the PBGC will assume responsibility for the company's base and salaried plans.

Under this approach, the company estimated that 100% of union plan participants and more than 99% of non-union plan participants will receive the full amount of normal retirement pension benefits that have already vested.

Hawker Beechcraft said it has reached a separate agreement to compensate those salaried employees and retirees whose pension benefits would otherwise have been reduced.

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, 2012 under Chapter 11 case number 12-11873.

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