Private Jet Maker Hawker Celebrates Goldman's Industry Optimism By PIKing Notes
What better way to celebrate Goldman's recent Conviction Buy optimism on Top 20 Bankruptcy Candidate Textron, and the private jet industry in general, than by clamping down and preserving liquidity at all costs? That's precisely what Textron competitor (and Goldman Sachs portfolio company) Hawker Beechcraft did earlier today. From an 8-K just released:
Item 8.01. Other Events
"PIK" Interest Election
Hawker Beechcraft Acquisition Company, LLC, a Delaware limited liability company (the "Issuer") and Hawker Beechcraft Notes Company, a Delaware corporation (the "Co-Issuer" and, together with the Issuer, the "Company"), may, at the Company's option, elect for any interest payment period prior to April 1, 2011, to use the payment-in-kind ("PIK") feature of its outstanding 8.875%/9.625% Senior PIK Election Notes due 2015 (the "PIK Notes") in lieu of making cash interest payments. The Company is electing to pay PIK interest for the interest period ending on March 31, 2010 as a prudent method to enhance liquidity in the first half of next year. The Company will evaluate this option prior to the beginning of each eligible interest period, taking into account market conditions and other relevant factors at that time.
In connection with this election, on September 28, 2009, the Company delivered notice to Deutsche Bank National Trust Company, in its capacity as Trustee under the Indenture governing the PIK Notes, that, with respect to the interest that will be due on such notes on the April 1, 2010 interest payment date, the Company will make such interest payment by paying in kind at the PIK interest rate of 9.625% instead of paying interest in cash.
It is sad Hawker is no longer public, courtesy of Goldman's very own deep pockets, as this event would have undoubtedly merited another Conviction Buy list upgrade for a company that is so desperate for cash that it is willing to eliminate a meager $40 million annual cash outlay (and in the process make many bondholders very unhappy) simply to survive. After all, judging by the number of ads and sponsored articles in any given issue of the Robb Report, the company's marketing budget is at least as large as the interest expense it is PIKing.
Yet, most oddly, one of these Robb Report ad placements highlights a curious benefit for those considering the critical purchase of a Hawker 900XP: "And now, realize up to $9.8 million in U.S. tax savings when you place your order before the end of 2009." Has the Obama administration, after sternly blasting any and all private jet purchases, made such acquisitions a tax deductible event in order to stimulate yet another soon to be TBTF industry? Zero Hedge will investigate what this latest addition to the US tax/subsidy code is and report promptly to our readers.