expects to exit Chapter 11 bankruptcy protection before year-end.
The May 3 filing will lead to the eliminaton of $2.5 billion in debt and will result in the company shedding $125 million in annual debt servicing requirements. “This massive deleveraging of the company will allow Hawker Beechcraft to have sustainable, consistent and long-term success,” Shawn Vick, executive vice president for customers, said at the opening of the EBACE business aviation show.
Once the company exits Chapter 11 it will likely take on some new debt, “but to a very small degree,” Vick says.
The Chapter 11 filing is also allowing Hawker Beechcraft to sort out some of its supplier relationship. With uncertainty hanging over the company’s financial future in the run-up to the filing, some suppliers were holding off shipping parts, impacting the aircraft maker’s ability to build its product. “We are now in the process of re-establishing our supply chain relationships,” he notes. When production will be back to normal is still uncertain, but should become clear when the company submits its restructuring plan in June.
As part of the restructuring, debt holders will become equity stakeholders in the company once it exits bankruptcy reorganization. Private equity firm Onyx and Goldman Sachs, who oversaw the leveraged buyout of Hawker Beechcraft, will be only small equity owners at the time.
Despite the uncertainty hanging over the company, Vick says some new aircraft bookings have been taken in the past few weeks. For the Hawker 900XP medium jet, bookings this year are running at around double last year’s rate. For the Hawker 400XPR, the company is now selling 2013 production slots after selling out 2012 positions even after boosting its production rate.
Overall, Vick says the sales environment is showing signs of improving, especially with some U.S. corporations buying aircraft again.
Vick also notes that as with other aircraft makers, Hawker Beechcraft has been approached about possibly shifting some of its production to China. However, he notes, currently there are no plans to do so.