(Adds background on company history, restructuring advisers, in
the 13th and 14th paragraphs.)
By Patrick Fitzgerald and Marie Beaudette
Of DOW JONES DAILY BANKRUPTCY REVIEW
Aircraft manufacturer Hawker Beechcraft Inc. filed for
bankruptcy protection Thursday, after striking a deal with
creditors to swap some $2 billion in debt for control of the
reorganized company.
Hawker, based in Wichita, Kan., and 17 affiliates filed for
Chapter 11 protection in U.S. Bankruptcy Court in New York after
agreeing to terms of a prearranged restructuring plan that will
erase about $2.5 billion in debt from its books.
Investment firms Centerbridge Partners, Angelo, Gordon &
Co., Sankaty Advisors LLC and Capital Research and Management own
large pieces of Hawker's $1.8 billion in senior debt, which they
will swap for the bulk of the company's new equity.
In February, Hawker hired Robert S. "Steve" Miller, a
restructuring veteran who oversaw auto-parts maker Delphi
Automotive's (DLPH) turnaround, to take over as chief executive
amid weak demand for business jets.
"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," Miller said in a statement Thursday.
Many of Hawker's difficulties were tied to an ill-timed 2007
buyout by Goldman Sachs Group Inc.'s (GS) private-equity arm and
Onex Partners, which purchased the company for $3.3 billion.
The company, one of the world's largest makers of business jets,
has also suffered from a prolonged slump in the corporate-jet
market. Hawker lost more than $630 million in 2011, and aircraft
deliveries have fallen by a third over the past two years.
The government's pension insurer, the Pension Benefit Guaranty
Corp., and bondholders led by Deutsche Bank AG (DB), as trustee,
owed more than $650 million are Hawker's largest unsecured
creditors, according to bankruptcy court papers.
Hawker's three pension plans are 56% funded, with $769 million
in assets to cover $1.4 billion in benefits, the PBGC said. If
Hawker were to terminate the plans, the PBGC said it would be on
the hook for $533 million of the $611 million shortfall.
The PBGC said Thursday it is committed to helping Hawker
restructure while keeping its pension plans intact.
"Our top priority is to work with companies so they can keep
their pensions going," said J. Jioni Palmer, the PBGC's director of
communications.
Hawker, which employs more than 7,000 people, has obtained a
$400 million bankruptcy loan from its senior lenders to keep its
doors open during the Chapter 11 case.
Hawker was created in 1994 as Raytheon Aircraft Co., after
Raytheon Co. combined its Beech Aircraft and Raytheon Corporate
Jets units.
The law firm of Kirkland & Ellis handling the Chapter 11
case. Its financial adviser is Perella Weinberg Partners LP and its
restructuring adviser is Alvarez & Marsal.
The case number is 12-11873. Judge Stuart Bernstein has been
assigned to initially handle the case.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection)
-By Patrick Fitzgerald, Dow Jones Daily Bankruptcy Review;
202-862-3544; patrick.fitzgerald@dowjones.com
--Mike Spector and Doug Cameron contributed to this article.