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Hawker Beechcraft talking with potential buyers

The plan also provides a framework of how the company will transfer ownership of the reorganized company to its creditors.

Later
in the process, Hawker Beechcraft will update the filing with more
detail about its business plan going forward, the company said.

The
plan is supported by the company’s largest creditors and by a
“substantial majority” of the debtors’ senior credit facility lenders
and holders of the senior notes.

The aim is to reduce the total funded debt from about $2.552 billion.

“Since
the restructuring process began, we have been guided by a single goal:
to emerge from Chapter 11 in the strongest possible operational and
financial position while preserving as many jobs as possible,” the
company said in a letter to employees Monday. “That remains our focus.
Your continued focus on designing, manufacturing and servicing the best
airplanes in the world is critical to achieving that goal.”

The letter was signed by Hawker Beechcraft CEO Steve Miller and Hawker Beechcraft Corp. Chairman Bill Boisture.

The
company filed for a pre-arranged Chapter 11 bankruptcy restructuring
agreement on May 3. The bankruptcy followed a prolonged downturn in the
business jet industry, with the recession hitting not long after Goldman
Sachs and Onex Partners bought the company in 2007 from Raytheon Inc.

On
Friday, the company issued 60-day layoff notices to 125 Wichita
employees. The latest round brings the total number of job cuts at the
plant to 906 people in Wichita so far this year.

It also takes employment in Wichita to fewer than 4,100 people.

The
company’s incentives from state and local government totaling $45
million is based on keeping 4,000 employed in Wichita over 10 years,
although cash payments aren’t reduced unless the work force falls to
below 3,600.

The compromise contemplated under the plan is fair
and equitable, will maximize value for stakeholders and provide for the
best recovery, the document filed with the court said. The plan also
aims to provide sufficient liquidity to fund the company’s emergence
from Chapter 11 bankruptcy, appropriately capitalize the reorganized
company and facilitate the implementation of the business plan.

“The
plan provides for a comprehensive restructuring of the (company’s)
prepetition obligations, provides for additional liquidity, preserves
the going-concern value of the … business and protects the jobs of
employees,” the filing said.

Courting potential buyers

For
several months leading up to the bankruptcy filing, Hawker Beechcraft
and its investment banker, Perella Weinberg Partners, developed a
comprehensive list of potential buyers and investors that could buy the
company’s assets.

Since May, they have continued to engage in discussions regarding various restructuring transaction structures, it said.

The
company believes that “recoveries to the Debtors’ stakeholders will be
maximized by the Debtor’s

continued operation as a going concern,” the
filing said. “The Debtors believe that their businesses and assets have
significant value that would not be realized in liquidation, either in
whole or in substantial part, and that the value of the Debtors’ estates
is considerably greater as a going concern.”

The company has
undertaken “significant efforts” before and after the bankruptcy filing
to market the business to “incumbent and third party potential plan
sponsors or acquirers,” the filing said.

But no decisions on whether to pursue a sale have been made, it said.

They
identified and vetted more than 35 potential buyers, ranging from
strategic purchasers to potential private equity partners, it said.

Perella
then contacted a targeted group of 15 potential buyers based on
strategic fit, financial capability and prior strategic dialogues.

It
included three domestic and 12 international parties, of which 13 were
strategic and two were financial buyers, the filing said.

Hawker
Beechcraft provided nondisclosure agreements to 10 of the parties, who
had access to diligence materials in a data room. The materials included
more than 2,400 documents regarding all aspects of the business and
financial condition.

The company held numerous discussions about
the information. Five of the potential buyers traveled or sent advisers
to Wichita for more detailed meetings with Hawker Beechcraft’s
management team and advisers, the filing said

And members of the company’s management team and Perella visited another four potential buyers in their “home countries.”

Hawker Beechcraft received eight bids, and on June 19, Perella asked six bidders to send revised proposals.

“The
Debtors are continuing to evaluate potential sale alternatives and may
elect to incorporate one or more sale or plan sponsorship transactions
into the plan” if they conclude that will maximize the value for
creditors and stakeholders, it said.