Hawker Beechcraft is beginning exclusive negotiations to sell most of the company to Superior Aviation Beijing after receiving approval from the U.S. Bankruptcy Court for the Southern District of New York on July 17.
HBC on July 10 formally sought court clearance to begin the negotiations after receiving a $1.79 billion proposal from the Chinese firm for all but the defense business.
Superior Aviation has agreed to make an initial deposit of $25 million by the end of the week and a second $25 million deposit within 30 days to keep certain HBC aircraft lines in production that Hawker Beechcraft says it otherwise would shutter.
The companies would negotiate a definitive agreement for up to 45 days that would serve as a stalking horse proposal for competitive bids under the bankruptcy process.
If the companies are unable to reach a definitive agreement, Hawker Beechcraft says it would seek approval for a preliminary reorganization plan filed June 30 that would have ownership of the firm transfer to the majority of its creditors in exchange for the elimination of about $2.5 billion in debt. That plan, which would keep Hawker Beechcraft as a standalone company, however, likely would mean significant changes in the HBC product line, including the end of its “jet-related businesses,” says the company, which filed for Chapter 11 bankruptcy protection on May 3.
The definitive agreement further must receive approval from the Committee on Foreign Investment in the United States (CFIUS) and other regulatory agencies, the company notes.
Hawker Beechcraft Inc. CEO Steve Miller, a corporate turnaround specialist who joined the firm earlier this year, says the agreement with Superior will enable the firm to preserve jobs while it negotiates a potential transaction with Superior and simultaneously prepares its plan of reorganization as a standalone firm.
“At this time, pursuing the potential transaction with Superior is in the best interests of the company and its various stakeholders, including our creditors, our employees, our suppliers and our customers,” Miller reiterates.
Superior Aviation CEO Tim Archer calls the court approval “a positive step forward” and says the companies will “aggressively work to keep jobs in the U.S. States by continued production of the Hawker and Beechcraft product lines and expanding the production, design and servicing of civilian aircraft in locations all across America including Kansas, Arkansas, Texas and many other states.”
The reassurance comes as questions have been raised by the potential long-term plans of Superior, which is 60% owned by a privately held entity and 40% by a company controlled by the Beijing municipal government.
The court approval came over the protests of the International Association of Machinists and Aerospace Workers (IAM), which filed an objection in a court docket claiming a lack of information about Superior and questioning claims that the proposal “could preserve thousands of American jobs.”
The IAM also said that neither the company nor Superior has detailed “the degree to which the jets business will be maintained.” The agreement essentially would give Superior the unilateral right to impact the jet business. The IAM is also concerned about the agreement that call for refunds if the exclusivity agreement is terminated.
The IAM further notes that hampers its own negotiations with the company during the bankruptcy process, and it is particularly concerned about plans to terminate underfunded pension plans that would pass on to the Pension Benefit Guaranty Corporation (PBGC).
PBGC also filed its own limited objection, stating the proposed “termination of the pension plans raises grave concerns” and “PBGC therefore reserves all rights to protect – and to object to unsatisfactory treatment of the pension plans as the sale process unfolds.”
The court cleared the motion to proceed, saying it “had determined that the relief sought in the Motion is in the best interests of the debtors’ estates, their creditors, and other parties in interest.”