	•	Hawker Beechcraft announced that it has reached an agreement with a significant majority of its largest debtholders on the terms of a financial restructuring plan that will eliminate approximately $2.5 billion in debt and strengthen the company for the future.
	•	To implement the terms of the prearranged restructuring on an expeditious basis, Hawker Beechcraft and certain of its subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Court granted approval of the company’s "First Day Motions" on May 4, 2012.
	•	The purpose of Hawker Beechcraft’s financial restructuring is to strengthen its balance sheet in order to fully support the company’s operations and service its debt.

2. What are the terms of the agreement?

	•	Under the terms of the plan we filed with the Court, Hawker Beechcraft will eliminate approximately $2.5 billion in debt and approximately $125 million of annual cash interest expense.
	•	In exchange for eliminating this debt, and upon confirmation by the Court and consummation of the plan, equity ownership in Hawker Beechcraft will be transferred to holders of the company’s secured debt, bond debt and certain other unsecured creditors.
	•	As part of the prearranged restructuring, Hawker Beechcraft has obtained a commitment for $400 million in Debtor-in-Possession (DIP) financing, which will enable it to pay all vendors and suppliers in the ordinary course for goods and services delivered after the commencement of the Chapter 11 case. This agreement with our largest lenders and bondholders will stabilize and improve Hawker Beechcraft’s capital structure.

3. What is Chapter 11?

	•	A Chapter 11 filing is a voluntary action that allows a company to operate its businesses in the normal course while it restructures or recapitalizes to improve its long-term financial health. During a Chapter 11 proceeding, the company reorganizes financially and, at times, operationally.
	•	Companies commonly file for Chapter 11 voluntarily because it provides them with legal protection and a Court-overseen process that makes it easier for the company to restructure its debts, recapitalize its balance sheet and emerge as a stronger, more viable business.
	•	Chapter 11 is entirely different from other kinds of bankruptcy proceedings where the focus is on liquidating the company. Hawker Beechcraft is not going out of business.

4. Why did Hawker Beechcraft decide to file for Chapter 11?

	•	As previously announced, Hawker Beechcraft has been working closely with its senior secured lenders and senior bondholders toward a comprehensive recapitalization that will better position the company for the future.
	•	Hawker Beechcraft has reached an agreement with a majority of its senior secured lenders and senior bondholders on the terms of a financial restructuring, which is being implemented through a voluntary prearranged Chapter 11 filing. This is the quickest and most effective way to implement the terms of our agreement with our senior secured lenders and senior bondholders.
	•	Restructuring our balance sheet and recapitalizing the company under the protection of the U.S. Bankruptcy Code and in partnership with our lenders will dramatically improve Hawker Beechcraft’s ability to compete in a rapidly changing environment.

5. How does filing for Chapter 11 help Hawker Beechcraft?

	•	The purpose of Hawker Beechcraft’s financial restructuring is to strengthen its balance sheet in order to fully support the company’s operations and service its debt. Despite the aggressive transformational changes in all operational functions that the company has implemented over the last three years, the company’s debt load restricted its ability to succeed and fully execute on its strategy. This process will relieve the company of a significant amount of that debt.
	•	The recapitalization of the company is a huge step forward toward completing the transformation of the company and ensuring that Hawker Beechcraft continues manufacturing the best airplanes and providing first-class service and support.
	•	Hawker Beechcraft expects to emerge from this process as a stronger company with a healthy balance sheet.

6. What is a prearranged Chapter 11 filing?

	•	A prearranged Chapter 11 filing means the company has secured the support of the significant majority of its senior secured lenders and senior bondholders for its financial restructuring prior to the Chapter 11 filing with the Court.
	•	By reaching agreement with its key creditor constituents in advance, Hawker Beechcraft anticipates that its Chapter 11 cases will be concluded by the end of 2012 and that the company will emerge from Chapter 11 as a strong and healthy business.
	•	Many companies have utilized Chapter 11 to implement financial restructurings in this way.

7. How will this agreement and the Chapter 11 filing affect the company’s day-to-day operations?

•

This process should have little impact on the company’s day-to-day operations. Hawker Beechcraft has received authority from the Court to continue to operate on a normal basis during the in-Court restructuring, and we have received commitments for financing to fund our operations throughout this process.

8. Who now owns Hawker Beechcraft?

	•	The Chapter 11 filing itself does not change the ownership status of Hawker Beechcraft.
	•	That said, once the Court approves our restructuring plan and Hawker Beechcraft emerges from Chapter 11 protection, the company’s current equity will be canceled and replaced by equity in the reorganized company.
	•	At that point, equity ownership in Hawker Beechcraft will be transferred to holders of the company’s secured debt, bond debt and certain other unsecured creditors.

9. Will Hawker Beechcraft have sufficient cash to operate following the filing?

	•	Yes. The agreement includes a commitment from certain members of the lender group to provide up to $400 million in DIP financing, which the company expects will ensure sufficient liquidity during the reorganization process and beyond.
	•	This DIP facility will fund Hawker Beechcraft’s operations, pay its suppliers and vendors, and for other corporate purposes.

10. What happens next?

	•	To implement the terms of this agreement as quickly and effectively as possible, we filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.
	•	The Court has granted approval of the company’s "First Day Motions" as part of the company's voluntary filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. These include requests for permission to pay employee salaries, wages and benefits, and to pay all vendors and suppliers in the ordinary course for goods and services delivered after the commencement of the Chapter 11 case.
	•	Hawker Beechcraft will provide appropriate updates as soon as we have them.

11. Will there be job reductions as a result of the Chapter 11 filing?

	•	Employment will not be directly impacted by this announcement.
	•	As part of developing a plan to restore the company’s financial health, the company will continue to review all product lines to improve Hawker Beechcraft’s competitiveness.
	•	We will provide appropriate updates as soon as we have them and are committed to treating our employees with respect.

12. Will more furloughs be instituted?

	•	Employment will not be directly impacted by this announcement.
	•	We are working aggressively to ensure our suppliers understand the terms and benefits of this announcement to ensure that we can continue our manufacturing operations as planned.
	•	The $400 million DIP financing we obtained will provide sufficient liquidity to fund our operations through the reorganization process, and we expect to normalize relationships with suppliers who may have temporarily changed the manner in which they do business with us.
	•	As part of our restructuring efforts, the company will continue to review all product lines to improve Hawker Beechcraft’s competitiveness. Our headcount may be affected by changes we decide to make in our product lines.

13. Will benefits be impacted by the filing?

	•	Compensation and health benefits will continue uninterrupted.
	•	401K benefits will also continue, but with some minimal delays.
	•	Bankruptcy restrictions will delay company matching contributions for approximately 25 days. Because of the delay, you will not see company match towards your 401K contributions on the next two paychecks.
	•	It is expected that the bankruptcy court will approve the matching contributions in approximately 25 days.
	•	Once we receive approval, we intend to make up any missed matching contributions and make all future matching contributions in the ordinary course of business.

14. What impact will this agreement or the Chapter 11 filing have on the company’s pension plan?

	•	The company's pension plan is not impacted by the filing of a Chapter 11 petition.
	•	There is the possibility that as part of the Chapter 11 process and in order to obtain financing to exit the bankruptcy, Hawker Beechcraft may be required to terminate its pension plan.
	•	If this is the case, Hawker Beechcraft’s existing pension plans would be taken over by the Pension Benefit Guaranty Corporation (PBGC), a government agency that pays for monthly retirement benefits, up to a guaranteed maximum of approximately $56,000 per year, when an employer is no longer able to pay promised benefits.
	•	Any termination of the pension will only be effective if it is approved and ordered by the Bankruptcy Court.
	•	Under these circumstances, and assuming our plan is approved by the Court, the PBGC would pay out benefits to vested plan participants in much the same way we do currently, provided that our agreement is approved by the Court.
	•	We will continue to provide updates regarding the pension plan as needed in a timely and consistent manner.

15. How will customer orders be affected now and following the Chapter 11 filing?

•

Customers will not be impacted by this filing. Hawker Beechcraft continues to conduct its business and serve its customers around the world. All orders for available products will be fulfilled and our commitment to providing the best products and service in the industry remains unchanged.

16. What impact will this agreement and the Chapter 11 filing have on Hawker Beechcraft’s ability to pay its vendors and suppliers?

	•	The company intends to pay suppliers under normal terms for goods received and services rendered after the filing date on May 3, 2012. Any claims for goods received or services rendered after the filing date are considered “administrative claims”, which receive a priority status. The Court has granted the company interim approval to access up to $400 million of the DIP financing.
	•	Suppliers who provided goods or rendered services to company prior to the filings (Petition Date) have what are referred to as “pre-petition claims.” United States bankruptcy laws generally require that all pre-petition claims are considered and processed through a very specific process administered by a claims agent. Companies in Chapter 11 are generally prohibited from processing pre filing invoices through normal accounts payable procedures. Suppliers will receive additional information from the company, or its claims agent at a later date.
	•	The company will respond to all supplier account inquiries as soon as reasonably possible.

17. What actions do Hawker Beechcraft vendors need to take to address outstanding invoices or amounts owed for goods or services provided before the Chapter 11 filing?

	•	United States bankruptcy laws generally requires that all unpaid invoices incurred before the company filed are considered and processed through a very specific process administered by a claims agent. Companies in Chapter 11 are generally prohibited from processing pre filing invoices through normal accounts payable procedures. The company will respond to all supplier account inquiries and options related to account status as soon as reasonably possible
	•	Alternatively, vendors can call:
		(866) 879-7096 – US/Canada
		(503) 597-7681– International
	•	If your question cannot be answered by the call center, it will immediately be escalated to the company’s management and team of advisors.

18. Will I be paid for invoices and work submitted after the Chapter 11 filing? Will I be paid for parts shipped after the Chapter 11 filing?

•

Yes, you will be paid for goods going forward in the normal course.

CHAPTER 11 REORGANIZATION FACT SHEET
A Chapter 11 filing is a voluntary action that allows a company to operate its businesses in the normal course while it restructures or recapitalizes to improve its long-term financial health. During a Chapter 11 proceeding, the company reorganizes financially and, at times, operationally. Companies commonly file for Chapter 11 voluntarily because it provides a process for the company to restructure its debts, recapitalize its balance sheet and emerge as a stronger, more viable business.

Chapter 11 is entirely different from other kinds of bankruptcy proceedings where the focus is on liquidating the company. Hawker Beechcraft is not going out of business.

In a pre-arranged bankruptcy like this, the company in question enters Chapter 11 after negotiating the terms of a restructuring with its major stakeholders, in our case our biggest senior secured lenders and [senior bondholders]. Once the company has obtained the support of its major stakeholders, it then enters Chapter 11 and moves to have the bankruptcy court approve the restructuring.

A major purpose of a Chapter 11 proceeding is to allow the company to reorganize so it will be viable in the future. During the proceeding, a company maintains its normal business operations [and continues to provide employees with salaries and benefits.]

Steps for Hawker Beechcraft
To implement the terms of this agreement as quickly and effectively as possible, we have filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The process should have little impact on the company’s day-to-day work. Hawker Beechcraft expects to receive authority from the court to continue to operate on a normal basis during the in-court restructuring, and we have received financing to fund our operations throughout this process. We will provide appropriate updates as soon as we have them.

Glossary

This glossary provides definitions for many of the standard terms that are used in Chapter 11 cases. While not all of these terms will apply to Hawker Beechcraft’s filing, we wanted to provide this document as a reference guide for terms that you may come across in the coming weeks.

Administrative Claim: An “Administrative Claim” is a Claim that arises after the “Filing Date,” which is granted priority treatment and entitled to payment in full under the Bankruptcy Code.

Automatic Stay: The “Automatic Stay” is an injunction that takes effect immediately upon the filing of a Chapter 11 petition. It prohibits, among other things, all collection actions against a “Debtor” and all actions to exercise control over property of a “Debtor.” The “Automatic Stay” also affects lawsuits commenced prior to the date of filing, preventing them from moving forward until the Chapter 11 case is over.

Bankruptcy: A general, informal term for the laws and proceedings associated with individuals and corporations that need to reorganize because of debt issues.

Bankruptcy Code: The informal name for U.S. federal bankruptcy law.

Bankruptcy Petition: The legal document that is filed with the Bankruptcy Court and initiates a bankruptcy case. The Bankruptcy Petition is, in most cases, filed with a variety of other supporting documents that contain information on the Debtor, including the Debtor’s financial information.

Chapter 11: The chapter of the “Bankruptcy Code” that governs reorganization and recapitalization (as opposed to liquidation).

Claim: A “Claim” is a right to payment, whether that right is fixed, liquidated, potential or contingent. “Claims” can fall into different categories: priority, secured, unsecured, contingent, liquidated, disputed or matured.

Confirmation: The official approval of the “Plan of Reorganization” by the Bankruptcy Court.

Creditor: A party owed money by a “Debtor.” Examples include banks that have loaned the company money or suppliers that have extended credit to the company. “Creditors” can be both “secured creditors,” holding debt that is secured by a lien against a company’s property or assets, or the creditor can be “unsecured,” holding debt that is not secured by such a lien.

Debtor: A person or business that files a petition under the “Bankruptcy Code.”

Debtor in Possession: A company seeking to reorganize or recapitalize under Chapter 11 that remains in control of assets and operations.

Debtor-in-Possession (DIP) Financing: Financing available to companies in Chapter 11 bankruptcy. This borrowing capacity allows companies to maintain normal business operations through the bankruptcy process.

Filing Date (also Petition Date): The date on which the Chapter 11 petition is filed.

First Day Orders: The first substantive requests for relief a company will make of the Bankruptcy Court in order to maintain operations with minimal disruption. These often include requests for permission to pay employee salaries, wages and benefits, and to continue payments to customers and suppliers.

Pension Benefit Guaranty Corporation (PBGC): A federally chartered agency that insures private sector pensions.

Plan of Reorganization (“POR” or “Plan”): The Plan a company negotiates with creditors and files with the Bankruptcy Court. It provides specific details regarding how the company plans to pay creditors and allow the business to be successful over the long term.

Post-Petition: Refers to the time after the “Debtor” files for bankruptcy protection. It’s often used to refer to goods or services provided after the company has filed for bankruptcy.

Pre-arranged bankruptcy – In a pre-arranged bankruptcy, the debtor enters Chapter 11 after negotiating the terms of a restructuring with its major stakeholders. Once the “Debtor” has obtained the support of its major stakeholders, it then will enter Chapter 11 and move to have the Bankruptcy Court approve the restructuring, as contained in the debtor's plan of reorganization.

Pre-Petition: Refers to the time before a “Bankruptcy Petition” is filed. It’s often used to refer to goods or services provided before the company has filed.

Priority Claim: Certain classes of “Claims” are given priority by the “Bankruptcy Code,” such as claims for unpaid wages or taxes. “Claims” must be paid in order of priority.

Recapitalization: A restructuring of a company's debt and equity mixture, most often with the aim of making a company's capital structure more stable. Essentially, the process involves the exchange of one form or source of financing for another.

Reorganization: The process by which a company in bankruptcy may develop its plan to resolve “Creditor Claims” and be a viable business once it emerges from bankruptcy.

The Process: Chapter 11 Milestones

For basic information purposes only, listed below are some of the milestones that will occur as Hawker Beechcraft and its subsidiaries move through the restructuring process. This description is not intended or offered as legal, professional or financial advice and is not a full and detailed outline of a restructuring process. You should direct any questions regarding your specific circumstances to your personal lawyer.

Days 1-4
The Debtors file their Chapter 11 petitions and also secure permission from the court to continue to maintain certain processes and duties that are required in the ordinary course of conducting their business; e.g., continue paying employee wages and offering employee benefits, etc.

Within the First Two Weeks
The Office of the U.S. Trustee (a governmental department tasked, in part, with overseeing the administration of a restructuring) selects the parties who will make up the Official Unsecured Creditors’ Committee (“UCC”) throughout the restructuring process.

The UCC represents all of the stakeholders who have an interest in the outcome of the Chapter 11 filing and will assist, throughout the restructuring process, with making decisions related to the restructuring.

Approximately 30-60 days after the Filing
An initial creditors meeting is held between representatives of the Debtors and individuals and businesses that may have claims against the Debtors (the creditors).

Within the first few months
The court will schedule a hearing to, among other things, provide for the creditors and other proper parties to vote on the plan of reorganization. Parties entitled to vote then vote on the plan of reorganization. Following voting, if the court confirms the plan of reorganization all claims will be satisfied as directed in the plan and the Debtors will emerge from Chapter 11 and operate their business as described in the Plan of Reorganization.

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