Confirming months of speculation, Hawker Beechcraft today filed for Chapter 11 bankruptcy protection in New York to eliminate $2.5 billion of its debt and $125 million in annual cash interest expenses, assuming the request is cleared by the courts.
The company in March gained approval from investors to delay $30 million in loan payments due 1 April. At the same time, it took on $120 million in new financing from leveraged buyout investors, saying the injection would give it time to recapitalise its operations.
Industry observers saw the move as a precursor to bankruptcy.
Hawker Beechcraft says the 3 May Chapter 11 filing was "pre-arranged", meaning that it has support for the move from the majority of its lenders and senior bondholders. "Financial institutions representing more than two-thirds of the company's bank and senior bond debt are parties to this agreement," it says.
The company is proposing to operate under a debtor-in-possession arrangement during bankruptcy, using $400 million in financing that it says "will enable it to continue paying employees, suppliers, vendors and others in the normal course of business."
Hawker Beechcraft chief executive Robert (Steve) Miller says the bankruptcy announcement represents "the next step forward".
"Restructuring our balance sheet and recapitalizing the company in partnership with our debt holders will dramatically improve Hawker Beechcraft's ability to compete in a rapidly changing environment," he says.