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Hawker Beechcraft defends bonus plan for top execs, says much to do yet in bankruptcy
WICHITA, Kan. (AP) Hawker Beechcraft on Thursday defended its plan to pay more than $5.3 million in bonuses to eight top executives, telling a bankruptcy court its managers are a "talented and capable group" with much work left to do before the company can emerge from bankruptcy.
The Wichita-based plane maker filed the document just hours before a hearing in New York over the disputed bonus plan for senior management. The company, which filed for bankruptcy in May, also is seeking an additional $1.9 million in bonuses for 31 other management-level employees.
The Justice Department's bankruptcy watchdog agency and the machinists union have filed objections to the bonus plan.
Hawker Beechcraft Corp. is owned by Onex Partners and GS Capital Partners, a Goldman Sachs private equity fund. The bankruptcy court has approved exclusive talks with a Chinese firm that has offered nearly $1.8 billion to buy the company's business jet and general aviation operations.
Hawker Beechcraft told the court in its Thursday filing that just because progress has been made on the bankruptcy, it does not mean there is nothing left to do. The company said its executives must work on two business plans at the same time: one that would reorganize the plane maker and allow it to continue as a stand-alone company, and that would prepare it to be sold.
If Hawker Beechcraft reorganizes as a stand-alone company, it still must shut down its business jet operations which would include closing facilities and cutting the workforce, the company said. Managers also would need to resolve the treatment of their pension plans, negotiate a new retirement plan, and secure support for the restructuring from creditors.
Selling the company's business jet and general aviation operations to Beijing-based Superior Aviation Beijing Co. Ltd. would involve obtaining multiple regulatory approvals and spinning off the company's defense business. Even if it reaches a deal with Superior, there still would be a competitive bankruptcy court auction seeking higher or better offers.
Hawker Beechcraft also noted its executives also must run the company while pursuing both options on an accelerated timeline. It said that, in order for any bonuses to be paid, the company must consummate the standalone plan before Dec. 15 or close the sale of the company before Jan. 15.
The company urged the bankruptcy court to overrule the objections from both the machinists union and the Justice Department's U.S. Trustee agency, which is tasked with overseeing bankruptcy cases. Both have challenged the bonus plan, contending it is essentially a "disguised retention plan" that does little other than reward managers for staying during bankruptcy reorganization.
U.S. Trustee Tracy Hope Davis argued there must be other factors such as "challenging standards" or "high hurdles" for debtors to overcome before they can be paid bonuses, and that Hawker Beechcraft's bonus plan did not meet those standards.
The International Association of Machinists and Aerospace Workers criticized the "complete irony and hypocrisy" of Hawker Beechcraft's plan to pay millions to top executives while other jobs are cut and the company seeks to eliminate pension plans.