Standard & Poor’s cuts Hawker Beechcraft rating to default

Standard & Poor’s has lowered Hawker Beechcraft’s corporate credit rating to default (D) after the manufacturer stated that it did not make interest payments on unsecured and subordinated notes.

Hawker Beechcraft said that it had failed to make interest payments of $28 million due of April 2 in an SEC 8-K filed that day.

The rating agency has lowered the rating on all of Hawker Beechcraft’s notes to D with a recovery rating of 6 which means that Standard & Poor’s believes that bondholders have less than a 10% chance of recovery.

Standard & Poor’s says the company’s secured credit facility is rated D with a recovery rating of 4.

“The indentures governing the notes allow for a 30-day grace period for interest payments, but not paying on the due date is a default under our criteria,” said Standard & Poor’s in a statement. “In the filing, the company also stated that it was not in compliance with the covenants in its secured credit facility as of Dec. 31, 2011, and that it did not file its 10-K for 2011 on time because of problems with its internal financial reporting systems.

It also stated that it expects the audit opinion in the 10-K will express concerns by its auditors about the company’s ability to continue as a going concern. Finally, the company expects to report a net loss of $482 million in 2011, including more than $300 million of restructuring and asset impairment charges.”

Standard & Poor’s downgraded Hawker Beechcraft’s rating to selective default (SD) because the manufacturer had not made a scheduled interest payment on its secured credit facility that was due on March 30. Even though 70% of lenders to the facility had deferred interest payments Standard & Poor’s still considers this a default.