Chinese bidder, Hawker Beechcraft to sign purchase deal in a 'few days'

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Hawker Beechcraft is within a "few days" of signing a $1.79 billion purchase agreement with Superior Aviation Beijing, but other bidders for the Kansas-based airframer could still emerge during a court-ordered public auction, says chairman Bill Boisture.

The purchase agreement "is going to happen in the next few days", Boisture said in an interview in his office on 5 September.

In fact, Boisture stopped the interview for about five minutes to take a phone call that he said could be the final agreement with Superior Aviation Beijing. After resuming the interview following the private call, Boisture did not elaborate on its contents, but confirmed the agreement will be signed within a "few days".

Hawker Beechcraft filed for bankruptcy in May and agreed to negotiate exclusively with Superior Aviation Beijing's bidders two months later. But the negotiations dragged on and the bankruptcy court agreed to extend the deadline to receive Hawker Beechcraft's restructuring plan until December.

If the purchase agreement with Superior Aviation Beijing is signed within the next few days, there is still no certainty that the Chinese aircraft parts supplier and light helicopter-maker will close the deal. The bid by Superior Aviation Beijing must survive two more hurdles.

First, the bankruptcy court will hold a public auction to receive additional bids despite the exclusivity agreement signed in July between Hawker Beechcraft and Superior Aviation Beijing.

"Why is there a public auction?" Boisture asks. "The bankruptcy court's responsibility is to achieve the highest possible value for the estate. You go out and look for alternative bids that exceed that amount and that's how the judge assures that he's got the highest value for all of the secured and unsecured creditors of the estate."

Other companies had expressed interest in acquiring Hawker Beechcraft before the agreement was announced with Superior Aviation Beijing. Potential suitors included Embraer and, reportedly, India's Mahindra Aerospace. The auction will give all interested parties another opportunity to close the deal.

"There could be another bidder," Boisture says.

Meanwhile, Hawker Beechcraft will also initiate a review by the Committee on Foreign Investment in the US (CFIUS) on the bid by Superior Aviation Beijing before the auction begins. "That's the only deal that we know about," Boisture explains.

Hawker Beechcraft will seek approval for a plan to segregate its defence products division, which includes sales and support of the T-6 trainer and the special mission variants of the King Air series.

The public auction and the CFIUS review will not be complete until the end of the year, Boisture says. It will then take a further six months to actually separate the commercial and defence divisions of Hawker Beechcraft, he adds.

The defence division will be owned, at least initially, by the primary lenders to Hawker Beechcraft - Centerbridge Partners; Angelo, Gordon & Co; Sankaty Advisors; and Capital Research & Management - Boisture says. But the division could be sold off or liquidated after it leaves Hawker Beechcraft's control.

"Like all other investment entities, at some point they will seek to monetise their investment," he says.