Hawker Beechcraft facing troubled times

The rumours began after the Wichita-based business aircraft manufacturer announced an agreement with lenders that provides a short-term reprieve from upcoming interest payments. The agreement also includes approximately $120 million of additional liquidity that will fund ongoing operations while Hawker Beechcraft works with lenders on long-term financing.

According to Aviation Week magazine Hawker Beechcraft views this loan as a demonstration of lenders’ confidence in the long-term value of the company but Standard & Poor’s (S&P) lowered its corporate credit rating to “CCC” and says that could further change to selective default (SD) or default if the company doesn’t meet its next obligations. “The outlook remains negative,” S&P said.

HBC is due to announce its 2011 results today but according to S&P cash generation has been poor and there is a $28 million in interest payment due April 1.  

Wall Street heavyweights such as J.P.Morgan, Morgan Stanley and Reuters have been predicting the  Chapter 11 filing.

Aviation Week quotes an analyst from Morgan Stanley as saying: “Our discussions with our industry sources in the past have indicated increasing reluctance by business jet buyers to order jets from an OEM in serious financial straits,” the analyst said, adding, “Many jet purchases include service guarantees that in part hinges on the OEM’s financial wherewithal to maintain a service network to honour these contracts.”

Despite this HBC announced a deal valued at $50 million for the sale of 10 King Air 350i and C90GTx aircraft to Chinese aviation company.

China or Middle Eastern buyers could be interested in the large support network or aircraft heritage including aircraft such as the Hawker 4000 and the King Air.