Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Gerry Schwartz, chairman, president and CEO of Onex Corp.

J.P. Moczulski

Onex Corp. doesn't make many money-losing mistakes, but the bond market is saying that it made a big one by sinking $500-million (U.S.) into a 2006 buyout of corporate jet maker Hawker Beechcraft.

Hawker debt is trading at levels that suggest investors fear a restructuring. According to Bloomberg News, Hawker Beechcraft bonds maturing in April, 2015, are on offer at 24 cents on the dollar.

That level signals serious concerns about the company's future.

Story continues below advertisement

The issue is that Hawker has a lot of money owed to banks that has to be repaid in 2014, and doesn't have the cash to do it. That comes after Standard & Poor's last week cut Hawker's credit rating to triple-C, and warned the company may need a restructuring. Moody's said in September that the company's current balance sheet is "unsustainable."

Onex bought Hawker using cash from its Onex Partners II buyout fund, a $3.45-billion fund. Onex is the biggest investor in OP II, which also includes money from outside partners such as pension funds.

Onex didn't fly solo on the original purchase. It put up about $500-million and Goldman Sachs Group Inc. put up $500-million. The rest of the $3.3-billion deal was financed by debt.

Onex and Goldman bet on a strong market for corporate jets and the potential of new models. However, with the economy in trouble, that hasn't played out. Revenue has been in decline and Hawker is burning cash.

Covering the interest payments on its debt should be no problem. However, if Hawker runs afoul of its debt covenants, the banks could force the issue before 2014. On the other side, Onex and Goldman have long track records with lenders and would expect to get some forebearance.

Bloomberg quotes an analyst as saying that the company's assets are worth about $1.05-billion, which means that bondholders would get some money back in a full-on restructuring, but Onex and co-owner Goldman wouldn't get any.

One option in such situations is for the original buyers to ante up more cash -- what some call an equity cure -- to fix the balance sheet. Another option is asset sales.

Story continues below advertisement

Onex has in the past shown great patience with tough investments, riding out down cycles. Sitel, a call centre operator that Onex owns, has been a good example of that.

However, Onex's partnership with Goldman in Hawker Beechcraft may affect that ability to sit tight in this case -- if Goldman wants to get out, that changes the dynamic.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies