Beechcraft now believes bigger is not better as it reinvents itself
Beechcraft has exited Chapter 11 bankruptcy protection with a new name, new ownership and a new balance sheet that has shed billions of dollars of debt. Now the company must move ahead with selling its shuttered Hawker business-jet line and building on the brands of its existing models of piston and turboprop aircraft.
The Wichita aircraft maker—formerly known as—on Feb. 1 received court approval for its joint plan of reorganization that transferred ownership from investors Onex Corp. and Goldman Sachs to its major creditors in exchange for eliminating the $2.5 billion in debt. The plan became effective Feb. 15, and the company officially announced itself as Beechcraft on Feb. 19, ending the bankruptcy protection process that began May 3.
The former debt holders own a tad more than 90% of the company. The major shareholders are Centerbridge Partners; Angelo, Gordon & Co.; Sankaty Advisors, and Capital Research & Management.
Senior management of the former Hawker Beechcraft carries over into the new company with the exception of Steve Miller, the corporate turnaround specialist who joined a year ago as CEO. He will hold an advisory role with the new board. Bill Boisture, chairman of Hawker Beechcraft Corp., is now CEO of Beechcraft. Robert Johnson, former head ofAerospace, is chairman of the Beechcraft board.
Onex and Goldman Sachs have lost most of their investment in the company, which according to one highly placed executive was a combined $1 billion. They also were bondholders, and received “pennies on the dollar,” similar to other unsecured creditors, Boisture says.
Beechcraft emerges as a smaller company, with employee numbers in Kansas dipping below the 4,000 level that the company guaranteed in order to receive full state and local incentives. Its total employment is 5,400, including facilities in Mexico. The company has a smaller product portfolio that includes its T-6A/B military trainer and AT-6 special mission aircraft derivative, along with the Bonanza and Baron piston-engine models and the King Air line of turboprops.
Last fall, the company outlined a vision of the future that could involve multiple new aircraft and began gathering feedback on the first of these, a single-engine turboprop concept.
But now Boisture says he plans to “talk a lot less” about new aircraft. Instead, he wants the company to assume a “Skunk Works mentality.”
Beechcraft will be concentrating on standing up the new company, maintaining the existing product line and fleet, and establishing credibility in the marketplace.
This includes repairing its supplier network, which Boisture concedes has suffered as part of the divestiture drama. The supply chain, he says, “is not fully functioning as [we] want it to, but functioning adequately to maintain production levels.”
The jet lines closed down last year, and the company has since sold its remaining inventory of new jets. Beechcraft hoped to find suitors for those lines, but put that search on the backburner in recent months to focus on finishing the bankruptcy process, Boisture says.
Although it is smaller, he notes, “Beechcraft has emerged from this process a stronger company with both financial and operational strength and stability.”
The company closed on $600 million in exit financing, including a $425 million term loan facility and a $175 million revolving facility. The term loan helped repay a debtor-in-possession credit facility, along with certain settlements that were part of the reorganization plan. J.P. Morgan Securities and Credit Suisse Securities (USA) were the lead arrangers of the financing.
As for the jets, Boisture says, “There has been considerable interest” and options are being weighed. A few scenarios could result—from a support organization buying the lines to maintain the existing fleet, to a manufacturing operation purchasing them to bring them back into production.
While the company dropped certain warranty and guaranteed support programs for the Hawker 4000 and Premier jets, it still will provide engineering support and maintenance for those aircraft and it has a stock of parts.
The company has closed its service centers in Mesa, Ariz., Little Rock, Ark., and San Antonio, but has retained nine facilities in the U.S. and one in the U.K. Also, its Global Customer Support unit is continuing to work on programs that include the Hawker 400XPR and 800XPR upgrades.
Regarding its existing product lines, Boisture concedes that the bankruptcy process—which included a possible takeover by Chinese interests—unnerved some potential customers. But he says confidence has improved as the company came closer to exiting the bankruptcy process.
Beechcraft's emergence from bankruptcy protection comes just days before the U.S. Air Force is slated to announce a decision on the rebid of its Light Air Support contract. Beechcraft is offering its AT-6 single turboprop in competition with's Super Tucano. The final decision, originally expected to be announced in January, is now set for Feb. 27.