Posts Tagged ‘Hawker Beechcraft’
Mahindra & Mahindra
India’s largest auto maker supplies components to Boeing and Gulfstream.
Nextant, which already offers the Hawker 400XP aircraft, might want to offer modifications for other models.
China Aviation Industry Corporation (AVIC) has joint ventures with both Embraer and Cessna and owns Cirrus Aircraft.The article states the company could still be interested in Hawker. Other Chinese firms might be interested, Corporate Jet Investor said. Xi’an Aircraft International acquired Austrian composite parts maker FACC in 2009. Hunan Boyun that makes carbon-fiber auto and aircraft parts could possibly be interested in Hawker’s carbon-fiber jet.
BAE Systems sold Hawker to Raytheon in 1993. It had been hoping to merge with EADS, which owns Airbus, but the deal fell through for political reasons, the magazine said. “Hawker could give it a commercial aircraft business of its own,” the magazine article said.
Almost before the naysayers could finish expressing shock at the Chapter 11 bankruptcy of Hawker Beechcraft, an end to the bankruptcy is in sight.
Hawker Beechcraft Vice President Shawn Vick met with Aviation Week and other reporters at the three-day European Business Aviation Convention and Exhibition (EBACE) in Geneva, Switzerland, today to say the company, which filed for bankruptcy May 3, will emerge from bankruptcy before the year is out. When it does, former owners Goldman Sachs and Onyx will be bit players, while creditors owed the majority of the company’s $2.33 billion in debt will become the new owners. EBACE ends May 16. An interesting tidbit emerging from the press conference is the reluctance suppliers have had to fill orders from the Wichita-based manufacturer. The bankruptcy will allow the company to re-establish its supplier network using the $400 million it has to continue operations during bankruptcy. The refusal of some of the suppliers to fill orders may explain why the company has had two layoffs it attributed to a shortage of composite parts. Local Wichita reporters reported last year that other manufacturers were not experiencing the same shortage.
Vick also reported orders are picking up for the Hawker 900XP and 400XPR models, with 900XP orders running double those received last year.
The only drama remaining from Hawker’s trip to the brink and back is what the restructuring will look like. Court documents suggested various alternatives, including shutting down its jet line and concentrating on the King Air and piston markets. Given that Vick just announced increasing orders for the 900XP and 400XPR models, a total abandonment of the jet market doesn’t seem likely, but we will know more when the reorganization plan comes out at the end of June. Cessna officials have indicated interest in whatever may drop from Hawker’s table, as have others. The King Air line of turboprops is enticing to competitors–along with the service those aircraft require–but will Hawker Beechcraft want to sell it? Not likely. Also, the company has expressed a belief before the present management change that its Bonanza and Baron lines serve as a step-up to its jets, meaning it might not want to sell them. Even if it did, those models are less attractive to competitors.
Could the Chinese be Hawker’s savior? Not according to stock analyst Heidi Wood, who said China has settled on Cessna as a partner, and is no longer shopping.
Hawker Beechcraft issued layoff notices to another 150 people yesterday, in addition to the 350 laid off three weeks ago. The Wichita Eagle reports that leaves levels in Wichita at 4,200. If it lays off a few hundred more the company will have to return tens of millions in financial aid gained from state and local governments.
Second issue: Is there confusion at United Technologies about the role that United Technologies is playing in the restart of Eclipse production? United Technologies Chief Financial Officer Greg Hays triggered the controversy during a phone call to financial analysts in April. United Technologies is the parent company of Sikorsky and Sikorsky owns aircraft manufacturer PZL Mielic in Poland.
Here’s Hays’ quote in answer to a question from stock analyst Howard Rubel of Jefferies & Company, who wanted to know why United Technologies is selling Rocketdyne but investing in Eclipse:
“Can I make it very clear we’re not going to invest any more money in Eclipse? We did make a small investment–less than $25 million–in Eclipse, really to service the aftermarket of the aircraft. I think there’s about 300 of those airplanes that have been delivered [incorrect–the actual number is 265]. But you know, we are not in the light jet business if you will. We’re in the aftermarket business supporting the planes that are out there, but we’re not in the manufacturing business for light jets. So, again, if we haven’t made that clear before…” He then asked Rubel if that was clear, and Rubel said, “Crystal.”
Very confusing, because Eclipse officials just signed a contract to build the jet with PZL Mielic that Sikorsky bought in March of 2007. So no, United Technologies does not build business jets, but Sikorsky’s subsidiary does. PZL makes the M-28 Skytruck in the King Air class of aircraft, but more importantly makes the S-70i Blackhawk. That’s the model that proves to the world that PZL is a first-class manufacturing facility, since nearly everyone in the world has heard of it. The United Technologies/Sikorsky/Eclipse will be well built.
Here from the report is what Hawker Beechcraft is required to say by company-hired accountants in the just-released report: “As of December 31, 2011, Management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. This conclusion was reached based on a variety of factors, including those described below. We determined not to pay our interest obligations under the Notes on April 2, 2012 and anticipate an inability to pay interest on the Notes on future interest payment dates. Furthermore, we will be required to repay or refinance our Senior Secured Credit Facilities and the Senior Tranche Advance prior to the repayment of the Notes and we will be required to repay or refinance the Senior Notes prior to the repayment of the Senior Subordinated Notes. The Company has suffered recurring operating losses resulting in a significant net shareholder’s deficit that raises substantial doubt about its ability to continue as a going concern. The Company is operating under a forbearance agreement with its lenders which defers interest payment obligations and provides relief from loan covenants through June 29, 2012. Due to the fact that we have recurring negative cash flows from operations and recurring losses from operations, we will need to seek additional financing. There is substantial doubt that we will be able to obtain additional equity or debt financing on favorable terms, or at all, in order to have sufficient liquidity to meet our cash requirements for the next twelve months.”
Here’s some analysis of what is going on from Morgan Stanley manager Heidi Wood, as reported by AOPA Editor at Large Tom Horne.
New Hawker Beechcraft CEO Steve Miller gets a nice bonus if he can keep the company out of bankruptcy. Called “incentive interests,” they amount to six percent of the value of equity holdings held by sponsors, and six percent of the increase in the value of the company’s bonds held by sponsors. However, his three-year contract also warns, if the company enters bankruptcy the incentive interests will be canceled. Aside from that bonus, Miller gets $1.5 million per year for three years as his regular salary, and a 100 percent bonus if he meets financial targets. He makes up to a 200 percent bonus if financial targets are exceeded. Also, it was agreed by the board of directors that he was to get an additional $5 million cash payment upon joining the company to reflect his surrender of comparable value when he left MidOcean Partners. He has to give it back if he gets fired in the first nine months. After that it will be prorated if he is fired. You can read the SEC filing on the contract here. (Click on; “Entire Filing Including Exhibits.” Don’t worry, it’s not that big.) As you probably have read, Hawker has retained Kirkland and Ellis for advice on bankruptcy, according to an unconfirmed report in the Wall Street Journal. Here is a link to a story by AOPA’s Jim Moore containing the link to the WSJ story. So Miller’s work is cut out for him, with bankruptcy attorneys waiting on the other line.