Hawker Beechcraft filed Chapter 11 bankruptcy today (May 3) and the aircraft maker said that immediate job cuts are not in store. However, the Wichita, Kansas-based airplane manufacturer did say that as it reviews its production lines in bankruptcy, layoffs could occur.
Hawker Beechcraft has a large manufacturing operation in Little Rock that employs roughly 450 workers. It also has facilities in Chester, England, U.K. and Chihuahua, Mexico.
Saying it was under stress from debt, Hawker filed for Chapter 11 bankruptcy, a voluntary restructuring move that will allow the company to operate while it reworks its financing. The bankruptcy is not as severe as a Chapter 7 bankruptcy that would shutter the company’s doors and force liquidation of assets.
Hawker moved quickly to announce it reached an agreement with a significant number of its senior secured lenders and senior bondholders on the terms of a financial restructuring plan that will eliminate approximately $2.5 billion in debt and approximately $125 million of annual cash interest expense.
As part of the pre-arranged restructuring, Hawker Beechcraft obtained a commitment for $400 million in Debtor-in-Possession (DIP) financing, which it said will enable it “to continue paying employees, suppliers, vendors and others.”
“We are pleased to have reached an agreement with our largest lenders and bondholders on a solution to stabilize and improve our capital structure,” said CEO Robert S. “Steve” Miller. “In the last three years, the company has made aggressive transformational changes in all operational functions, and today’s announcement represents the next step forward. Restructuring our balance sheet and recapitalizing the company in partnership with our debtholders will dramatically improve Hawker Beechcraft’s ability to compete in a rapidly changing environment.”
BUSINESS AS USUAL FOR NOW
Hawker Beechcraft said it would continue “to operate in the normal course of business” during bankruptcy.
It disclosed that employment would “not be directly impacted by this announcement” and no furloughs or layoffs were expected. However, the company is reviewing its product lines to “improve Hawker Beechcraft’s competitiveness.”
“Our headcount may be affected by changes we decide to make in our product lines,” the company said in a Frequently Asked Questions section of its website.
For employees, there will be changes to benefits as far as timing, but long-term changes are still unclear.
Hawker said 401K benefits would continue, but with some minimal delays. Company matches towards 401K contributions will not appear on the next two paychecks for workers due to bankruptcy rules. The company did say it intended to make up any missed matching contributions eventually.
The company also noted that the Chapter 11 petition would not affect its pension plan immediately, but it did warn that major changes could come.
“There is the possibility that as part of the Chapter 11 process and in order to obtain financing to exit the bankruptcy, Hawker Beechcraft may be required to terminate its pension plan,” the FAQ section stated.
“If this is the case, Hawker Beechcraft’s existing pension plans would be taken over by the Pension Benefit Guaranty Corporation (PBGC), a government agency that pays for monthly retirement benefits, up to a guaranteed maximum of approximately $56,000 per year, when an employer is no longer able to pay promised benefits. Any termination of the pension will only be effective if it is approved and ordered by the Bankruptcy Court,” the company said.
The company’s web site also offered explanations by letters to customers, vendors and suppliers.