Hawker Beechcraft struggling under debt, losses

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Associated Press

Posted on April 4, 2012 at 10:01 AM

WICHITA, Kansas (AP) — Hawker Beechcraft Inc. has told federal regulators it expects to record losses of nearly $482 million for 2011 when it files its annual report later this month,

The Wichita-based aircraft-maker also noted in a filing to the Securities and Exchange Commission that it expects its report on April 16 to include an explanatory statement from its independent accounting firm expressing "substantial doubt about its ability to continue as a going concern."

Hawker Beechcraft said in a written statement Monday that the notice reflects the company's financial position as of Dec. 31. The firm said it is working with its lenders toward a comprehensive recapitalization to resolve the issues and better position the company for the future.

Hawker Beechcraft Inc., the parent company of Hawker Beechcraft Corp., manufacturers business and military aircraft at facilities in Wichita; Little Rock, Arkansas; Chester, England; and Chihuahua, Mexico. It also has more than 100 service centers worldwide.

Richard Aboulafia, an aerospace analyst at the Teal Group, said Hawker Beechcraft has been caught a "perfect storm."

"The situation is grim," Aboulafia said. "Their market fell by 60 percent over the past three years and at the same time a totally new and aggressive competitor occurred, (Brazil-based) Embraer, and they have a heavy debt load."

He said Hawker Beechcraft's management has been "pretty good" and has done everything it can do to cut costs and improve sales.

The company wrote in its SEC notice that it anticipated losses from operations of about $481.8 million, including restructuring and non-cash intangible asset impairment charges of $304.9 million when it files its 2011 report. That compares with operational losses the previous year of $173.9 million, including $40.5 million in similar restructuring and non-cash charges.

More ominously, Hawker Beechcraft said it was in violation of its financial covenants with its primary lenders as of Dec. 31 and had entered into a forbearance agreement. The company said it is negotiating with its secured lenders and others regarding a comprehensive recapitalization.

"If the Company is unable (to) develop a plan for and implement a comprehensive restructuring, or ensure sufficient liquidity to maintain operations, there can be no assurance that it will continue to operate as a going concern," according to its SEC filing.

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