July 2, 2012 / 6:41 PM / 5 years ago

RLPC-Hawker Beechcraft files restructuring plan

NEW YORK, July 2 (Reuters) - Aircraft maker Hawker Beechcraft Inc has filed a reorganization plan which will give secured lenders at least 81 percent of the company's equity when it emerges from bankruptcy, as it pushes ahead with asset sales of some or all of the business.

Hawker Beechcraft, which was bought by Goldman Sachs Group Inc's private equity arm and Onex Corp in a leveraged buyout in 2007 for $3.3 billion, filed for Chapter 11 bankruptcy protection in early May.

Both owners stand to loose all of their equity and subordinated bondholders are also expected to be wiped out in the debt restructuring.

A weak business jet aircraft market left Hawker Beechcraft with shrinking liquidity and unable to support a $2.5 billion debt load against $54 million of operating earnings generated in 2011.

Under the plan, holders of the $1.7 billion senior credit facility will have a $921.6 million secured claim. Remaining claims will be deemed unsecured with the exception of a $125 million senior loan advance which was repaid by the company's Debtor-In-Possession (DIP) loan.

The unsecured claim will rank alongside senior bondholder claims and the company's pension plans, all of which will receive the remaining 19 percent equity in the reorganized Hawker Beechcraft.

Hawker Beechcraft's restructuring plan is taking a tough line with the Pension Benefit Guaranty Corporation (PBGC) as it tries to shed the company's three defined benefit pension plans.

The company said that the "combination of low interest rates, decreased investment values, and provision of guaranteed pension payments to its employees" will need almost $400 million of pension contributions in the next five years.

At a bankruptcy hearing on May 30, Hawker estimated that its pensions were underfunded by $495 million, while the PBGC put the funding shortfall higher at $611 million in a June 26th court filing.

The PBGC is on the Official Committee of Unsecured Creditors and is the largest unsecured creditor in this bankruptcy case.

The size of the pension claim could influence the success of the reorganization plan and help to allocate the equity that the pension plans and other unsecured holders will receive if this reorganization plan is confirmed.

Unsecured bonds that were repurchased by Hawker as part of a cash tender offer will not receive any equity under the plan, as secured creditors say that they have a claim on these repurchased bonds.

Hawker owns $354 million of these bonds and approximately $510 million of senior notes are still in third party hands.

The reorganization plan also includes a cash payment for holders of unsecured claims. With the exception of the senior facility, holders with claims of less than $200 million can choose to receive cash instead of equity. The cash amount has not been disclosed.

Seperately, Hawker's three industrial revenue bonds will be reinstated.

A new exit loan will repay Hawker's $400 million DIP facility. The terms and size of the exit loan remain subject to negotiation.

The reorganization plan shows Hawker's determination to exit bankruptcy, but the company is continuing to explore asset sales of all or some of the company.

After inviting nine interested parties to conduct due diligence, the company asked six of those parties to revise bids last week, the documents show.

The company is aiming to confirm and execute its reorganisation plan by November 15 and December 15, respectively. (Reporting by Billy Cheung, edited by Tessa Walsh)

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