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Bankruptcy: Hawker Beechcraft's exclusive negotiation period with Chinese buyer approved, despite union objections

Hawker Beechcraft won bankruptcy court approval to enter into a 45-day exclusive negotiation agreement with Superior Aviation Beijing Co. Ltd. in exchange for $50 million provided on a rolling, non-refundable basis.

U.S. Bankruptcy Judge Stuart Bernstein approved the exclusive negotiation period at a hearing in Manhattan this afternoon, calling it a sound exercise of the company’s business judgment.

Superior made a preliminary offer of $1.79 billion for Hawker Beechcraft’s assets, subject to definitive documentation to be hashed out during the exclusive period. If Superior chooses to move forward, it will serve as the stalking-horse bidder at a public auction, where it will potentially compete with higher and better offers.

As LCD reported, the International Association of Machinists and Aerospace Workers (IAM), which represents about 3,500 of the company’s nearly 18,000 employees, objected to the agreement (See, “Hawker’s proposed sale to Chinese company prompts union objections,” LCD News, July 17, 2012). At this afternoon’s hearing, IAM attorney Sharon Levine, of Lowenstein Sandler, objected that Hawker has offered no proof Superior will walk away from the deal without exclusivity, and worried about the chilling effect it might have, both on other potential bids and on ongoing pension negotiations between IAM and the company. Hawker’s three pension plans will be dumped under the current Superior offer, but the company’s standalone reorganization plan also contemplates rejecting its pension liabilities.

Levine’s arguments largely fell on deaf ears as attorneys for Hawker Beechcraft, its senior lenders, and the official committee of unsecured creditors all expressed their support for the deal. “There is no downside to approving the exclusivity agreement,” said creditors’ committee lawyer David Botter, of Akin Gump Strauss Hauer & Feld. “There will still be an auction to follow.”

Joshua Scherer of Perella Weinberg Partners, who is leading the sale effort for Hawker, testified that he had identified 35 potential buyers, 15 of whom he ultimately approached – consisting of only three domestic parties, and 12 foreign. The nearest offer from a domestic company – which went unnamed in court today under confidentiality agreements, but was identified by Levine as an “IAM shop” – was $500 million less than the $1.79 billion offered by Superior. The next highest overall bid was only $50 million less than Superior’s bid, but did not include the $50 million Superior is willing to offer upfront, Scherer said.

Since the Superior deal was announced, Scherer testified that he had received “several phone calls” concerning the sale, “suggesting we’ll have a robust auction.” – John Bringardner