Debt-laden aircraft maker Hawker Beechcraft said it will go it alone after plans to sell itself to a Chinese firm fell through, but likely will get out of the corporate jet business.
The Wichita, Kansas-based company, owned by the private equity units of Goldman Sachs and Onex, filed for bankruptcy protection in May, unable to support a USD$2.5 billion debt load.
Hawker, which makes general aviation turboprops and military aircraft as well as business jets, said in July that it was in exclusive talks with the China's Superior Aviation over the sale of the company for USD$1.79 billion.
It said on Thursday it could not agree terms with Superior, a 60-40 joint venture between privately owned Beijing Superior Aviation Technology and government-backed Beijing E-Tong International Investment & Development.
At a conference in New York on Thursday, Hawker chief executive Steve Miller said China-bashing by US presidential candidates may have contributed to failure of the sale talks, which involved many complex issues.
"Global politics may have interfered," said Miller, who was in Beijing last week trying to sell the firm. He mentioned competing calls from Democrats and Republicans for toughness on China's currency policies.
In Tuesday's presidential debate, Republican Mitt Romney slammed President Barack Obama for allowing China to keep its currency at low levels to the detriment of US competitiveness and trade deficits. Obama said he is tougher on trade policies with China than Romney would be.
Hawker, whose sale would have needed approval from the Committee on Foreign Investment, a US government panel, also faced other cross-cultural complexities
"We are disappointed that the transaction did not come to fruition, but we protected ourselves by obtaining a USD$50 million deposit from Superior that is now fully non-refundable and property of the company," Miller said in a prepared statement.
Hawker, which filed for bankruptcy in May, said it intends to emerge from Chapter 11 in the first quarter of 2013 as a standalone company focusing on turboprop, piston, special mission and trainer/attack aircraft. It said it will rename itself Beechcraft.
The company said it was evaluating strategic options with creditors for its Hawker product line, which includes the struggling business jet division and that the business would be closed if there are no satisfactory bids.
Under the proposed deal with Superior, Hawker's politically sensitive defence business would have remained a separate entity that analysts said would probably be sold to a US buyer.
Prospects for the jet business look grim, analysts said.
"I don't see any of the established players like Bombardier taking an interest in the segment," said Neal Dihora, an analyst at Morningstar.
"The summer bookings (for business jets) have been slow and it is a very crowded space. The prospective buyer would have to be a new entrant with deep pockets."
Hawker's US competitors include General Dynamics' Gulfstream and Textron's Cessna, as well as Brazil's Embraer and Canada's Bombardier.
Hawker, which will file an amended reorganisation plan, said general unsecured claims will be cancelled and holders will receive equity in the reorganised company.
Under the new plan, the company will receive a new loan and will be able to repay its USD$400 million in debtor-in-possession financing.
The new reorganisation plan, which is subject to approval from the bankruptcy court, has the support of major creditors, Hawker said. A hearing is expected on November 15, it said.
Goldman Sachs' private equity unit and Canada's Onex, bought Raytheon Aircraft from Raytheon for USD$3.3 billion at the height of the buyout boom in early 2007 and renamed it Hawker Beechcraft.
The company, loaded down with debt from the buyout, went into a tailspin after the 2008 financial crisis and subsequent economic downturn.