The business jet maker Hawker Beechcraft is readying a bankruptcy filing
BY MICHAEL J. DE LA MERCED AND PETER LATTMAN
The business jet maker Hawker Beechcraft is readying a bankruptcy filing, people briefed on the matter said on Wednesday, dealing a blow to its private equityowners, Goldman Sachs and Onex Partners.
Hawker, which is based in Wichita, Kan., said on Tuesday that it had obtained $120 million in additional loans to buy it time to fix its balance sheet. In exchange, a majority of the company's debt holders agreed to defer some interest payments and grant relief from loan covenants.
One of the options Hawker and its advisers are considering is a prearranged Chapter 11 filing that has the consent of those lenders, principally a number of hedge funds, said these people, who spoke on condition of anonymity. Among them are the hedge funds Centerbridge Partners and Angelo Gordon.
A Hawker bankruptcy would be put an end to a 2007 private equity deal that was troubled almost from the start. The company was formed when Goldman and Onex, the largest private equity firm in Canada, bought Raytheon's private jet unit for $3.3 billion, hoping to seize on the fervor for private jets.
Hawker hit rough times soon afterward, as a recession wiped out many discretionary expenditures like private jets. The company laid off about 2,500 employees, and lost billions of dollars as customers like NetJets canceled orders for new aircraft.
Within two years of the leveraged buyout, Goldman's buyout arm told investors that it had written down the value of the company by 85 percent.
As of Sept. 30, Hawker had more than $2 billion in long-term debt and $146.7 million in cash and short-term investments. It posted an $88.6 million loss for the third quarter of last year, its seventh in a row as its revenue slid to $518.8 million.
A representative for Hawker Beechcraft declined to comment. News of a potential bankruptcy filing was reported earlier by Reuters.
Hawker has made several efforts to fix its business, including by hiring the boutique investment bank Perella Weinberg Partners and the law firm Kirkland & Ellis. Last month, Hawker named Robert S. Miller, the former head of Delphi Automotive and a restructuring specialist, as its chief executive.
Mr. Miller said in a statement on Tuesday that while the company had taken steps to improve its operations, its debt load is weighing heavily on its turnaround effort.
"We believe this agreement will stabilize the company's current financial position and ensure Hawker Beechcraft continues manufacturing the best airplanes for our customers and providing first-class service and support," he said.
A bankruptcy filing of Hawker would be another loss for Goldman's buyout arm, which is contending with a number of troubled investments. Chief among them is Energy Future Holdings, the Texas utility giant formerly known as TXU, whose value has plummeted along with the price of natural gas. Goldman's real estate private equity funds have also struggled.
The unit's own future is uncertain, given new financial regulations to restrict a bank's ownership of investment operations like private equity.