LITTLE ROCK — Judge Stuart Bernstein of the U.S. Bankruptcy Court for the Southern District of New York on Friday approved the Chapter 11 reorganization plan for Hawker Beechcraft Inc. except for a technical matter for one of its subsidiaries.
The court approved the company’s agreement with the Pension Benefit Guaranty Corp. and the International Association of Machinists to address its pension plan.
The company filed for bankruptcy protection in May and talks with a Chinese company to sell all of its assets for $1.8 billion collapsed.
The Wichita, Kan.-based plane-maker plans to emerge as a stand-alone company that will make propeller-driven aircraft. It is shedding its jet business and will be renamed Beechcraft Corp.
The company employs about 170 at its Little Rock completions center, which finishes jets to customer specifications.
Bernstein heard no major objections from creditors Thursday while reviewing a draft of the plan during a lengthy hearing at a federal bankruptcy court in Manhattan. He said he wanted minor changes in the wording before granting final approval.
“Assuming I don’t have a problem with it, I’ll approve it,” Bernstein said.
Lawyers for the company said it expects to emerge from Chapter 11 in the second half of February, led by the same management team.
As of Dec. 31, Hawker Beechcraft employed 5,400 people company-wide, including more than 3,300 at its Wichita headquarters. It remains unclear if that total will change as it emerges from bankruptcy.
Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, said that given the financial turmoil, it was “remarkable” that the 3,000 current and laid-off workers represented by the union will still have retirement benefits.
“It is a credit to both sides of the bargaining table that workers’ interests at Hawker were given the respect they deserve,” he said in a statement.
The company has secured an underwriting commitment for $600 million in exit financing consisting of a term loan and revolving line of credit from JPMorgan Chase Bank and Credit Suisse.
The slimmed-down company will focus on more profitable turboprop, piston, special mission and military aircraft, as well as its parts, maintenance, repairs and refurbishment business.
Under the reorganization plan, secured bank debt incurred before the bankruptcy as well as unsecured bond debt and certain general unsecured claims will be canceled with those creditors receiving equity in the reorganized company. A board appointed by the new owners will take over once the company emerges from bankruptcy protection.
Hawker Beechcraft, owned by Onex Partners and GS Capital Partners, has struggled with the sluggish business-jet market more than other plane makers. It was purchased in 2007 in a highly leveraged deal just before the general aviation market tanked.
The complex bankruptcy proceedings have involved 18 entities and $2.4 billion in debt. In addition to its Wichita headquarters and Little Rock operation, the company has factories in the United Kingdom and Mexico, as well as more than 100 service centers worldwide.
Hawker Beechcraft traces its Kansas roots to Beech Aircraft Corp., a company founded by Walter and Olive Ann Beech that began making aircraft in the 1930s.
The judge set another court date for April 9, describing it as a “post-confirmation” status conference.
Information for this article was contributed by Jack Weatherly of the Arkansas Democrat-Gazette and Tom Hays and Roxana Hegeman of The Associated Press.
Business, Pages 29 on 02/02/2013