Helicopter Operator CHC Group Files for Bankruptcy Protection
May 05 2016 - 3:40AM
Dow Jones News
CHC Group Ltd. on Thursday filed for bankruptcy protection as
one of the world's largest helicopter operators joined a slew of
oil-field services companies caught by the downturn in global
energy prices.
The filing came just days after a fatal crash of one of its
helicopters in Norway forced the company to ground much of its
fleet.
"The step we have taken today provides an orderly path to
enhance our financial flexibility and establish a competitive
capital and operating structure that will allow us to invest in and
grow CHC's business over the long-term," Karl Fessenden, President
and Chief Executive of the Richmond, British Columbia-based
company, said.
CHC is one of two global companies alongside Houston-based
Bristow Group Inc. that dominate the business of ferrying workers
and cargo offshore for energy companies and have been forced to
shrink and cut costs.
A boom in demand for flying when oil prices passed $100 a barrel
drove rapid expansion in the sector and had lured companies such as
General Electric Co. into a nascent business leasing helicopters
for big energy companies. Now, industry executives estimated that a
fifth of the global fleet of helicopters is idle or underused.
CHC operated a fleet of 231 helicopters on Jan. 31 and had been
exploring a debt-restructuring for several months even before the
April 29 crash of an Airbus Group SE EC225 helicopter.
The accident killed its two pilots and 11 oil workers flying
back to the Norwegian mainland, and led regulators in the U.K. and
Norway to ground the EC225, a workhorse helicopter with a history
of technical problems.
CHC leased 157 helicopters and operated 42 EC225s, and had
orders with manufacturers including Airbus, the Sikorsky unit of
Lockheed Martin Corp. and Leonardo SpA's AgustaWestland.
Mr. Fessenden said "normal business operations will
continue."
The company has struggled under successive private equity owners
to restructure its long-term debt, which stood at $1.38 billion at
Jan. 31, according to regulatory filings.
Cash has dwindled as demand for flying decreased, and the
company sought to boost liquidity by drawing down the remaining
$233.4 million on its revolving loan.
On April 15, it skipped a $46 million interest payment on
approximately $1 billion in bonds, triggering a 30-day grace period
to make the payment and avoid default. Under agreements with the
company's other creditors, a default on the bonds could cause a
default on its other debts.
The move prompted Moody's Investors Service to downgrade the
company deep into junk territory, and the ratings agency said a
chapter 11 filing appeared likely.
CHC, which went public two years ago, has seen its market value
wiped out after peaking at $1.3 billion, and the company was
delisted from the New York Stock Exchange in January. First Reserve
Corp, a specialist private-equity firm in the energy sector, paid
C$3.7 billion ($2.9 billion) for the company in 2008.
The company had $237 million in firm orders for new helicopters
and $245 million in options, though like its peers it had been
negotiating with manufacturers and leasing companies to defer deals
or return aircraft early.
Lawyers at Weil Gotshal & Manges and Debevoise &
Plimpton are representing the company, which is also working with
financial advisers at Seabury Advisors, PJT Partners and CDG
Group.
The company filed for protection in the bankruptcy court for the
Northern District of Texas.
Robert Wall contributed to this article.
Write to Jacqueline Palank at jacqueline.palank@wsj.com and Doug
Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
May 05, 2016 03:25 ET (07:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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