Hawker Beechcraft Inc., the jet maker partly owned by Goldman Sachs Group Inc. (GS), named turnaround specialist Steve Miller as chief executive officer as the company works to avoid breaching debt covenants.
Miller’s hiring spurred American International Group Inc. (AIG), the bailed-out insurer for which he is chairman, to review succession plans. Miller, 70, was designated in 2010 to serve as interim CEO at AIG in the event that Robert Benmosche has to step down while fighting cancer.
The new chief takes over immediately at Wichita, Kansas- based Hawker Beechcraft, which has been close to violating loan terms as a softer global economy saps business-aircraft demand. Hawker Beechcraft hired Perella Weinberg Partners LP as a financial adviser in December, and its bonds have been tumbling.
“They are working to address their debt situation, so it’s not surprising that they would look to bring in outside people to help,” Christopher DeNicolo, a Standard & Poor’s credit analyst in New York, said in an interview today. “The market for small- and mid-sized business jets is still fairly weak.”
Miller succeeds Bill Boisture, who will remain chairman of subsidiary Hawker Beechcraft Corp. Nicole Alexander, a company spokeswoman, didn’t immediately return a phone call or e-mail seeking comment on whether Miller will lead a restructuring.
The maker of Hawker-brand business jets was in compliance with debt covenants as of Dec. 12, Alexander said at the time. She also said then that the company probably would “need to address our revolving credit agreement.”
Hawker Beechcraft’s 9.75 percent notes due in April 2017 fell 4 cents to 8 cents on the dollar at 2:02 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
DeNicolo said Hawker Beechcraft may continue to face debt covenant compliance issues, and a $1.4 billion debt maturation in March 2014 may increase chances of a distressed debt exchange or restructuring.
Hawker Beechcraft’s small- and mid-sized business jets compete against models from General Dynamics Corp. (GD)’s Gulfstream Aerospace, Textron Inc. (TXT)’s Cessna Aircraft and Bombardier Inc. (BBD/B)’s Learjet.
“This is certainly the most crowded part of the business- jet market,” DeNicolo said. Hawker Beechcraft also makes military training and light-attack aircraft and small planes used for air ambulance and aerial survey needs.
Miller remains chairman at New York-based AIG, according to the insurer, which received a 2008 federal bailout that swelled to $182.3 billion. He became a director in 2009 before moving up to chairman the next year.
“The board has an active succession planning process and will be assessing its plans in light of Mr. Miller’s announcement,” Mark Herr, an AIG spokesman, said in an e-mail today. Benmosche in December said he would like to remain CEO past 2012, longer than previously planned.
AIG has sought to assure investors there will be a smooth CEO transition as the U.S. government winds down its investment. Peter Hancock, who runs AIG’s global property-casualty business, and life-insurance head Jay Wintrob are two internal front- runners to be the next CEO, former General Counsel Ernest Patrikis said last year.
Miller dubbed himself “The Turnaround Kid” after a career of helping hobbled companies survive. He helped oversee the bankruptcy of auto-parts suppliers Delphi Corp. (DLPH) and Federal- Mogul Corp. (FDML) and assisted in Chrysler Corp.’s return to profits after taking $1.5 billion in government loans in 1980. Chrysler repaid that borrowing seven years early.
His 2008 autobiography was called “The Turnaround Kid: What I Learned in Rescuing America’s Most Troubled Companies.”
That background “should reassure creditors that he’s not new to the game” in the event that Hawker Beechcraft opts to file for Chapter 11 protection, said Dan Luria, director of research for the Michigan Manufacturing Technology Center.
In a statement, Miller said he was “honored” to join Hawker Beechcraft to “help this company navigate through the challenges of the current general aviation market.”
Goldman Sachs Capital Partners, the fifth-biggest U.S. bank’s private-equity arm, and Onex Corp. bought Hawker Beechcraft in 2007 for about $3.3 billion, giving the bank and Canada’s largest buyout firm equal stakes of 49 percent each.
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