Textron looking to borrow $1.1 B to finance its Beechcraft acquisition

By Rizza Sta. Ana

Dec 27, 2013 12:53 PM EST

Cessna aircraft manufacturer Textron Inc is now looking to finance its acquisition of the parent of planemaker Beechcraft Corp, Beech Holdings LLC, after it had agreed to purchase the latter this week. Textron is seeking to borrow $1.1 billion, according to a Businessweek report.

In a statement released by the Providence, Rhode Island-based company via Business Wire, JPMorgan Chase & Co will be providing the much-needed funding for the acquisition of Beech Holdings. Half of the financing was said to be a pre-payable bank loan in a five-year term, according to Chairman and Chief Executive Officer Scott Donnelly, who disclosed the information on a teleconference with investors and analysts today. The remaining half will be financed with the bond, Donnelly said, and that the combined debt overall will have a 3.75% interest rate.

According to Textron's statement, it will be purchasing all of Beech's outstanding equity interests, which was formerly known as Hawker Beechcraft Inc. The transaction was valued at $1.4 billion, and is expected to be concluded in the first six months of 2014.

Standard & Poor's analyst Sol Samson had written in a report today, which read, "The transaction does not affect our ‘satisfactory' business risk assessment on Textron. Textron's credit metrics will remain comparable to its historical and previously expected debt measures, since the company has managed to substantially reduce debt and retire obligations recently."

According to Bloomberg's compiled data, the Cessna aircraft manufacturer has around $3.45 billion in outstanding debt. S&P had given Textron a BBB-, which means that the outlook of the company is stable. Moreover, Textron's stable outlook was also affirmed by Moody's Investors Service, which handed out an equivalent Baa3 to Textron.

When asked by Businessweek about the financing for the Beechcraft acquisition, Textron spokesman David Sylvestre was not immediately available to comment.

In May 2012, the Wichita, Kansas-based designer and maker of light- and medium-sized jets had filed for Chapter 11 reorganization. It is currently controlled by its former creditors, which include Centerbridge Partners LP, Sankaty Advisors LLC and Angelo, Gordon & Co, the report said.

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